THE Green Party has called upon George Osborne to stop encouraging private shareholders to profit from public construction projects.
The call comes after Osborne announced £5bn of spending on building schools and other capital projects, which would go towards funding contracts for new Private Finance Initiatives (PFIs). Osborne has also announced that PFIs will be amended to increase their value for money to the taxpayer.
Under PFIs’ current terms, the taxpayer pays the private sector to undertake, and profit from, public projects. Osborne has agreed that the current system is unfair, and so has amended PFIs to allow the taxpayer to potentially take a 49% share in the proceeds, and appoint directors to the boards of individual projects. There’s already a name for a system in which the taxpayer is entitled to all proceeds, and the direction of the projects are democratically controlled –the ‘public sector’.
The money for the additional capital expenditure is to come from cuts to Whitehall departments, but the plan reflects the bankruptcy of ideas at the heart of the Treasury. Capital expenditure financed by reciprocal cuts represents no net increase in spending, and so it is not an effective fiscal stimulus.
Green Party leader, Natalie Bennett said: "The plan reflects the bankruptcy of ideas at the heart of the Treasury - when the coalition was formed, capital spending as a percentage of GDP dropped from 2.5% to 1.2%. Capital expenditure financed by reciprocal cuts represents no net increase in spending, and so it is not an effective fiscal stimulus, as the Chancellor is suggesting.
"And we know that PFI is an expensive, inefficient method of funding that will see future generations continuing to pay for the Chancellor's attempts to keep what should be government borrowing off his books - when that borrowing could be done at historically low interest rates. PF2 is simply a minor rejig of an already discredited system."
Nor is the increase in education spending a real-terms boost for children - Department for Education data suggests that a shortfall of up to 90,000 school places is likely in London boroughs alone, and the cost of meeting this is likely to be £2.3bn. This is in addition to the fact that councils have had to make continuing cuts to their budgets, resulting in the closure of libraries, after-school clubs and school support staff.
PFIs financed by capital expenditure (in turn, financed by cuts) represent some of the worst aspects of both austerity and the Conservative’s neo-liberal fixation with private sector profits. Osborne is sticking to his discredited economic agenda, and the latest plan to cut spending in one area to finance another is merely an example of deck-chairs being rearranged on the Titanic.