London (Parliament Politics Magazine) – A senior Labour backbencher is aiming to have liabilities from schools and hospitals constructed under private finance initiative (PFI) deals analysed under a new budget responsibility bill.
How Could the New Budget Responsibility Bill Impact PFI Liabilities?
Stella Creasy, who has tabled two revisions to the bill, stated this would help highlight the scale of debt incurred. She also desires trade deals such as the post-Brexit agreement with the EU to fall under its remit, discussing these can have an even greater fiscal impact.
The budget responsibility bill, pledged in the king’s speech, is a direct response to Liz Truss’s catastrophic mini-budget, which was forced through without any prior assessment by the Office for Budget Responsibility (OBR), the government’s fiscal watchdog.
Under the bill’s intended provisions, any “fiscally significant” government action must first be assessed by the OBR, a standard known as the fiscal lock. The stated definition of fiscally effective is something costing the match of at least 1% of GDP in any year during the current five-year forecast period.
That amounts to almost £30bn, with the tax cuts in the Truss mini-budget counting about £45bn.
Creasy is claiming that while no individual PFI contracts are that big, they should be seen cumulatively. Used mainly by Tony Blair’s government to settle for new schools and hospitals over several decades, with private companies building and maintaining buildings for an annual payment, they have resulted in many public organisations paying huge interest charges.
Why Does Stella Creasy Want Trade Deals to Be Included?
Altogether there are £151bn of repayments expected, and Creasy expressed some NHS trusts were paying more on repaying PFI debts than on drugs. Similarly, Creasy claims that the Brexit deal has been launched to cost the UK economy more than £300bn by 2035 compared with remaining in the EU, another vast cost which, as it stands, would not be viewed by the new bill. “In these tight financial times every penny of public money counts. That’s why we need to put the costs of borrowing from the private sector and trade deals beyond the political spin and onto the nation’s books so that we can all see clearly whether such deals or debts are in the public interest,” Creasy stated.
“PFI has been a damper on the public finances for decades now – and some trade deals such as Brexit have commanded us more than others which generate growth.” She said PFI and trade deals were “examples of policies that individually may not satisfy the threshold in this legislation at present, but cumulatively can be horrifically expensive if we don’t know what we’re getting into”.