THE PRIVATE Finance Initiative (PFI) that Gordon Brown introduced during the Brown-Blair Labour governments has provided a cash bonanza of hundreds of billions for the big banks, and played a major role in pauperising the NHS and getting it ready for the banks to own the lot, that is for privatisation.
The Centre for Health and the Public Interest (CHPI) has noted in a special analysis that: ‘The NHS is currently in the most austere decade of funding growth in its 69-year history and is facing an unprecedented funding gap of up to £34bn over the 5-year period to 2020/21.
‘With planners facing the unenviable task of rationing care, questions have been raised about areas of NHS funding where savings could be made without affecting patient care. A recent CHPI report found that over the past 6 years PFI companies made pre-tax profits of £831m and are estimated to make profits of almost £1bn over the next 5 years.
‘In theory a windfall tax could be levied to recoup some of the excess gains made by PFI operating companies (SPVs) with NHS or social care contracts. The tax could be raised from gains arising from the fall in the corporation tax rate from 30% (FY07/08) to 20% (FY15/16), and down to 17% by April 2020.
‘When PFI deals were designed and negotiated they included an expected rate of return for the investors along with agreed payments over the lifetime of the contract (on average 27 years for health contracts).
‘One of the modelled costs in the contract was the expected corporation tax rate that would be paid by the investors. The majority (92%) of NHS and social care PFI contracts were agreed and signed before the reduction in corporation tax (standard) rates in 2008/09 from 30% and so their models reflect this higher rate.
‘For every £100m of pre-tax profit that is made by PFI operators they will now in 2021 receive £83m of post-tax profit instead of the expected £70m at the original tax rates. This is a huge increase in returns and a windfall.
‘Companies that built and run NHS hospitals under Private Finance Initiative contracts will have made about £190m in unexpected windfall profits by 2020 because of George Osborne and Philip Hammond’s cuts to corporation tax, research suggests.
‘Analysis by the Centre for Health and the Public Interest found that more than 100 PFI operators in the NHS collectively saved an estimated £84m between 2008 and 2015 and are due to gain another £106m between 2016 and 2020 because of the falling corporate tax rate.
‘The PFI companies are making bonus profits because the corporation tax rate has fallen from 30% when the majority of their contracts were negotiated to 19% now and is due to drop as low as 17% by 2020. Some companies may be deferring their tax liabilities to later in their contracts when the rates will be lower.’
The Labour MP Stella Creasy has been calling for a windfall tax on PFI operators at a time when the NHS is under unprecedented pressure to save money. Creasy said PFI companies were ‘acting like legal loan sharks to the public sector’ and should not be ‘getting a nice bonus from the government’s cuts in corporation tax’.
Creasy adds: ‘If the companies themselves won’t propose how to renegotiate these contracts and so a more reasonable price for the public sector, then Parliament can send a strong message about our willingness to legislate for a windfall tax to reclaim some much-needed funds for our local public services.’
John McDonnell received repeated standing ovations from Labour activists in Brighton as he announced at the party’s autumn conference that he would ‘bring existing PFI contracts back in-house’. An accompanying press release about the PFI policy was less radical than McDonnell’s speech, suggesting Labour would take the contracts in-house ‘if necessary’. McDonnell just ran away!
The situation is obvious – while workers have endured over 10 years of wage cuts, the robber banks have made billions out of the PFI and for them Hammond’s Budget brought them a new bonanza through further cuts in corporation tax.
What we need is a workers government and a socialist revolution that will finance the NHS by expropriating the biggest robbers under capitalism, the big banks and the big finance companies!