PFI and secrecy

There is a very good analysis by economists Margaret and Jim Cuthbert on the financial impact of Scottish PFI school schemes in the journal Public Finance. They conclude:

“Overall, the findings in our research paint a worrying picture of the squeeze which is going to be imposed on other areas of local authority service because of PFI contractual commitments, as the financial pressures on local authorities intensify. In particular, if we now hit the combination of relatively high inflation combined with real-term cuts in the support local authority gets from central government, the problems faced by many local authorities with PFI commitments are likely to be severe.”

When asked to comment on this work my reaction was that this is exactly what we warned would happen when these schemes were signed off. PFI contracts are effectively ringfenced, so when public finances get tight they take up a larger proportion of total spending. No one in their right mind signs off 25 year plus contracts because you simply cannot anticipate developments in both public finance, inflation and service need that far ahead.

It may be slightly childish to say 'I told you so', but we did. I personally stomped the conference circuit, told politicians and officials as part of a small band of sceptics at the time. The Tories introduced PFI for largely ideological reasons. Labour continued with them because it provided off balance sheet funding for new schools and hospitals. The SNP scaled back but have now returned to the trough. Politicians have to learn that there is no such thing as a free lunch in relation to capital finance. Sadly we are now paying the price of that hard reality.

The work that UNISON, the Cuthberts and others have done on this issue has been greatly facilitated by freedom of information laws. All of these deals were done in great secrecy because those doing them knew full well that the numbers simply didn't add up. Sadly this message seems to have passed the Scottish Government by.

In December 2009 the Scottish Government said it was considering extending FoI to firms who have public sector contracts, as well as Trusts running local authority sports, leisure and cultural facilities amongst others. But the Scottish Government said last Wednesday - just as Tommy Sheridan's perjury sentence was dominating the news - that the proposals would not proceed. Parliamentary business minister Bruce Crawford said it would be "premature" to extend coverage before other deficiencies in the Act can be put right.

Information Commissioner, Kevin Dunnion has rightly commented that Scotland is at risk of falling behind in FoI best practice. The lesson of PFI is that openness is the only policy and the Scottish Government is wrong to cave in to business interests on this issue.