With the spending review looming there is one budget cut we should all get behind. Britain is paying out £10billion a year on PFI loans taken out to build schools and hospitals. With so many public institutions in financial difficulty, tomorrow Labour needs to offer both an expose of Osbourne's fiscal callousness and credible and radical alternatives for securing value for money for the British public. Renegotiating repayment of these debts could not only save money - it could also be an opportunity to protect public services from privatisation. Just as we took on the payday lending companies, so now Labour should lead the fight against those bleeding our public sector dry.
The sums involved are eye-watering. Currently UK PFI projects are worth £57billion, for which the Government is committed to paying back £232billion by 2049/50. The Treasury Select Committee concluded borrowing in this way was double the cost of the long term government gilt rate. And it is not just the interest that is extortionate. Once these companies have a contract, most squeeze more money out of the public sector in overpriced service charges and maintenance. One hospital was charged £52,000 to demolish a £750 shelter for smokers. Another school had to pay £302 for a new plug socket, five times the cost of the equipment it wanted to plug in. In total PFI will cost every household £4,000 a year for the next eighteen years - equivalent to the entire school refurbishment programme budget, or the gap between local and national government spending itself.
Barts Health Trust in East London has the largest UK PFI deal made at £1.1billion. By 2049 the amount paid back will total £7billion. Last year alone the Trust shelled out £148million - equivalent to the salaries for 6,000 nurses - of which half paid for interest accrued on the loan alone. Barts has a deficit of £90million which lead managers to downgrade nursing posts - little wonder the CQC placed my local hospital into special measures as the quality of care has declined and it struggles to fill vacancies. But whilst Barts faces an uncertain future, its creditors do not. Innisfree owns 50% of the Barts deal and expects to make £18billion from eighteen different PFI projects across Britain. It has just twenty five staff, one of whom earned £2million last year alone.
If Labour can be fairly criticised for using PFI, the sight of hospitals struggling with such debts make the lack of the current Government's action all the more galling. Their own review failed to secure any savings in 82% of deals. Little wonder some are taking matters into their own hands - Northumbria Council took out a loan to buy out Hexham hospital's PFI, and in doing so has saved £3.5million every year over the remaining 19-year term.
Some argue for these deals to be written off altogether - risking the chance no one would ever lend to the public sector again lest it defaults or higher rates of interest in future to compensate. Instead, we need to give local communities the tools - and money - to renegotiate these debts in the best way for them. This means exploring how and if we could convert the Public Sector Works Board into a credit union for the public sector. This could then offer PFI stricken institutions loans at lower rates of interest. Turning these into Cooperative trusts as a condition of such a bailout could give local residents the power to borrow and buy out services directly and own them - thus also putting them in the hands of their users and beyond any possible future threat of privatisation.
The experience of the cooperative finance sector shows renegotiation of debt is both possible and effective. If the Chancellor is serious about sorting out public finances he would pilot a scheme to enable this in the public sector to demonstrate the wider potential of such models. Reforming PFI to make it better value for money and people led is just one of many examples where applying insights from the co-operative movement offers a way forward. When it comes to slashing public spending, tackling these loans is one change we can all sign off.
Stella Creasy is the Labour and Cooperative MP for Walthamstow