Labour's PFI debt will cost five times as much, Conservatives claim

Labour’s PFI debt will cost five times as much, Conservatives claim

Taxpayers will end up paying five times over for building projects funded by Private Finance Initiative deals commissioned by the last Labour government, the Conservatives have claimed.

Hospitals have complained that PFI service contracts mean that they have to pay up to #333 to have a light bulb changed Photo: ALAMY

By Rosa Prince, Political Correspondent 8:00AM GMT 27 Dec 2010

The schemes were a pet project of Gordon Brown as chancellor and involved companies taking on the upfront capital costs of paying for public building schemes such as hospitals or motorways in return for receiving substantial rates of return over long periods of time.

New analysis issued by the Tories shows that the 544 PFI projects agreed under Labour will cost every working family in the country an average of nearly £15,000 each, even though the original building cost stands at just over £3,000.

On average, the gap between the total repayment and the actual cost of the building is the equivalent of £11,700, four times the original pricetag.

Jesse Norman, Conservative MP for Hereford and South Herefordshire, is leading a campaign to encourage banks, construction firms and service companies which have benefited from PFI in the last 10 years to give back a small proportion of their profits.

He accused Ed Miliband, the Labour leader who worked for Mr Brown during his decade at the Treasury, of sharing responsibility for the debacle.

“Under Gordon Brown, Labour went on a spending splurge with borrowed money which taxpayers’ will eventually have to pay back many times over,” Mr Norman said.

“As a senior Treasury adviser working for Gordon Brown, Ed Miliband bears responsibility for a borrowing trick that will mean future generations saddled with billions in debt.”

By agreeing long-term deals with private firms, Labour believed that growth in the economy coupled with the long timescale for repaying the debt would mean a good deal for taxpayers despite the high price tag of PFI deals.

Some auditors feel that PFI helped disguise the true scale of the fiscal crisis facing the country by the end of the last government's time in office, because the deals are hidden off balance sheet, and so do not contribute to official debt figures.

Under the terms of the PFI deals struck by Labour, taxpayers are due to pay £245 billion by the 2047/48 financial year. However, the 544 projects involved cost only £51.5 billion to build.

George Osborne, the Chancellor, recently told how he was informed that under the Treasury’s PFI service contract signed by Labour, the cost of supplying a Christmas tree to the Treasury stood at £900, despite being sold by the retailer B&Q for only £40.

A few months earlier, he had been told that the PFI contractor would charge £148.58 to provide a fish and chip lunch for six in his private office.

In the end, Mr Osborne, Mervyn King, the Governor of the Bank of England, and their team ate the same lunch in the Treasury canteen for £32.88.

Hospitals have complained that PFI service contracts mean that they have to pay up to £333 to have a light bulb changed.

A hospital in Hereford was charged £963 to have a new television aerial, and a school £1,000 for a computer desk which normally retails at £200.

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