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SALFORD CITY COUNCIL’S £835MILLION PFI DEBT AS LABOUR PARTY PROMISES TO END THE SCANDAL
 

Star date: 26th September 2017

SALFORD COUNCIL'S FIVE PFI CONTRACTS FOR SCHOOLS AND PENDLETON TO COST £17MILLION IN INTEREST ALONE THIS YEAR

At yesterday's Brighton conference, Labour Party Shadow Chancellor, John McDonnell, promised to end the scandal of Private Finance Initiative, or PFI, which is costing Salford City Council a fortune in interest and repayments.

Salford Council has five PFI contracts for schools and the Pendleton Together property refurbishment, for which the Council has a £835million liability, with interest payments alone this year of almost £17.5million.

Meanwhile, Salford Royal NHS Foundation Trust has its own PFI, for which it will end up paying £170million just in interest – more than the original £137million cost of its new buildings.

Full details here...


Salford Council PFI payments The People v PFI
click image to enlarge

For years, campaigners have been saying that the Private Finance Initiative, or PFI, has been draining public services via huge repayments of interest and service charges.

The contracts, many of which have been sold on to offshore finance companies, were originally brought in by the Labour Government of Tony Blair but at yesterday's Labour Party Conference in Brighton, Shadow Chancellor, John McDonnell, promised to end the rip-off.

McDonnell insisted that a Labour Government would sign no more PFIs or similar arrangements..."We'll put an end to this scandal and reduce the cost to the taxpayers" he said "How? We have already pledged that there will be no new PFI deals signed by us. But we will go further. I can tell you today, it's what you've been calling for. We'll bring existing PFI contracts back in-house."

Both cash-strapped Salford City Council and Salford Royal NHS Foundation Trust are mired in PFI debt.

Having already paid millions of pounds back to PFI finance vehicles Salford Council still has a total of £835.34million liability in repayments, interest and service charges over the next thirty years, according to its latest accounts. £257million of the total is for interest alone.

This year Salford Council has set aside a total of £34.7million to pay for PFI, including £17.49million in interest.

The Council currently has PFI contracts for schools and the Pendleton Together refurbishment of properties, with interest rates of between 8% and 10%.

The school contracts are for the building and maintenance of three special high schools, seven high schools and one primary school.

The PFI for the first two high schools, begun in 2009 and over 25 years, will see total payments of £229million, including interest and maintenance, when the actual building cost was £55.6million.

In 2011, Salford Council began another 25 year PFI contract to build three more new schools. Government figures show that the capital cost was £69.9million, with the final cost a staggering £274.4million.

Originally both contracts were with a SPV (Special Purpose Vehicle) called S & W TLP (Project Co One and Two), in which companies Hochtief and Lang O'Rourke held an 80% stake, with Salford Council and Amber Infrastructure holding 10% each.

Between four and five years later, however, Hochtief and O'Rourke had sold their stake to HICL Infrastructure, an offshore company based in the tax haven of Guernsey, which has continued to reap huge profits from the contracts.

Over the remaining years of both contracts, the Council is committed to making payments of £430million, supported by Government grants of over £276million, but still having to find £153.373millionfor schools that cost around £125million to build in the first place.*

The eye watering costs are matched by the Pendleton PFI, for which the £78.7million original capital cost will end up costing over £430million by the time it's finished. This year, the total Pendleton PFI cost to Salford City Council will be £5.971million, a rise of almost £400,000 on last year.**

Meanwhile, Salford Royal NHS Foundation Trust has its own PFI for the new blocks added onto the hospital. By the time the PFI is over, in 2042-43, the total payments for the project are estimated at £705millionfrom an initial £137million capital cost.

In 2015, accounts show that the Trust was paying £5.37million in interest alone. Stretched over the 34 years of the PFI this would mean that the Trust was paying £170million just in interest more than the original £137million cost of the new blocks.***

Similar to the schools, the PFI contract for Salford Royal has been sold on. In July 2013 Balfour Beatty sold its 50% holding in the Consort Healthcare SPV to HICL Infrastructure Company Limited for £22million, generating a profit of £11.5million...

HICL Infrastructure Company Limited is registered in the offshore tax haven of Guernsey, and at the time of the sale, Balfour Beatty was getting an annual rate of return of 18.8%, according to the European Services Strategy Unit, which is studying and producing reports on all the country's PFI projects.

Today, the campaign group, The People vs PFI, welcomed John McDonnell's speech...

"It's a scandal that hospitals and schools make cuts to staffing and services, while extortionate repayments they are due to pay on their PFI contracts are ring-fenced, even subsidised by Central Government" said The People vs PFI campaigner Joel Benjamin

The campaign argues that there's two ways to bring PFI contracts back in-house: nationalising the Special Purpose Vehicles, and buyouts.

"Buyouts are hugely expensive and private investors can walk away with their money early to invest in more PPPs" it states "Nationalising the SPVs puts the government, not private companies, in a commanding position, the contracts will automatically become public and various forms of profiteering can be ended.
 
"Nationalisation would not be hugely costly" it adds "In reality, it is the extortionate cost of present PFI financing arrangements that must be fully scrutinised. UK taxpayers cannot be expected to pay full price when ending PFI contracts: poor building quality and fire safety failings evidenced by Edinburgh Schools, Peterborough Hospital and Chalcots Estate, tax avoidance, interest rate rigging by PFI lending banks and excessive profit extraction must all weigh in the final account."

In the meantime, the scandal of PFI is now on the political agenda...

"….Never again will this waste of taxpayer money be used to subsidise the profits of shareholders, often based in offshore tax havens" said McDonnell "The government could intervene immediately to ensure that companies in tax havens can't own shares in PFI companies, and their profits aren't hidden from HMRC..."


 
For a full background into the Salford PFI projects see previous Salford Star articles...

*For school PFIs – click here

*For Pendleton PFI – click here

*For Salford Royal Hospital PFI – click here and click here

The Fat End of The Wedge wrote
at 12:48:14 AM on Friday, September 29, 2017
And Blair Labour's uncontrolled immigration plan, which seems to be continued by the Tories, leads to the need for all these wonderful extra schools and hospitals etc. And this has nothing to do with Brexit as most immigration is, and was, from outside the EEA. I thought the Tories were actually supposed to be sorting this out (Labour's mess) but they reneged on the deal "Despite being so critical of PFI while in opposition and promising reform, once in power George Osborne progressed 61 PFI schemes worth a total of £6.9bn in his first year as Chancellor." What pees me off is the likes of the BBC reporting it as a positive for Labour, whereas the Star has impressed by pointing out the hard truths.
 
wrote
at 8:26:01 AM on Wednesday, September 27, 2017
Great. The Labour Party has a new advisor. Where would they be without MJF. He is priceless.
 
Michael James Felse wrote
at 3:34:12 AM on Wednesday, September 27, 2017
On reflection it was the only way back then to get new schools and hospitals. I then disagreed with the high cost terms but now Labour has seen my point about taking the PFI back the plan will be a success. Salford needs to shout a big yes to Labour today.
 
Spencer wrote
at 1:50:47 AM on Wednesday, September 27, 2017
I see only fraud here who ever negotiated these contracts should be investigated. This is stealing money from less affluent areas and giving it back to the tax dodgers. Someone's making a lot of money from this sham, corruption at it finest.
 
Ava LM wrote
at 1:50:05 AM on Wednesday, September 27, 2017
A box of gloves to salford trust £7.20 plus VAT A box of gloves at Quality Save £1.99. No Bueno 😬
 
Joe O'Neill wrote
at 2:43:33 PM on Tuesday, September 26, 2017
Funny really Bill Hinds explained PFI to me years ago, a headmaster runs a School the boiler goes what does he do? normally gets the best quote for the job, but what of the PFI School? they have to go to the PFI and pay through the nose and yet even though people like Hinds and thousands of others where against Labour went ahead, all this so the cost does not show on the balance sheet and Labour can boast more Schools Hospitals and Cloned police stations, the result chaos budget overruns and closure of services. Labour and the Tories must take the blame but more so Labour. I wait for Labours spin doctors to weave this one. Alice thinks there is a way out how so because these contracts are going to cost a lot to buy back, perhaps Corbyn can get Mrs Abbott on the job seeing she did so well with the Police Figures and I forget the idiot who came up with the ending of student loan debt.
 
Hedley Hopper wrote
at 1:40:16 PM on Tuesday, September 26, 2017
Utterly Gobsmacked!!! Never thought that one, who generally employs the perpendicular pronoun when referring to oneself, would find oneself in agreement with the Corbynista Chancellor!!! Those amounts owed still by Salford Council and Salford NHS Trust over the remaining years of the PFIs' existence surely would finance all the planned austerity cuts! But one DOES have to remember that Labour nationally & at Local Govt level made the greatest use of PFIs since their inception. Perhaps the PFIs have come home to roost and Labour Councillors need to don their Gannex macs to keep their suits clean!!
 
Alice wrote
at 1:40:11 PM on Tuesday, September 26, 2017
Good piece of research with mind blowing evidence of the PFI mistaken policies. Good to know there will be a way out of this financial mire.
 
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