Green perspectives on Stockwood and Bristol. Mostly.

Thursday, 29 January 2009


The big thing claimed for the Private Finance Initiative (PFI) is that it gets local authorities off the hook of putting big money into high risk projects. Instead, the private sector takes on the risks (and as we all know, that's what they're good at!)

Successive governments have been so enthusiastic about this that they give councils and health authorities big incentives to go down the PFI funding route. I suspect it's because it shows up better in the national books if capital funding comes from the private sector - even if, as generally happens, the public finish up paying far more for an inferior product.

Now, it's that risk element that intrigues me. The controversial bid to seek PFI funds for a waste incinerator at Avonmouth should rest on the premise that the private sector bears the investment risk. In practice, the whole choice of preferred technology rests on the fact that the banks won't risk their money on anything else but this sure-fire cash cow - fed by public cash in the form of 25-30 years of contractual gate fees, with penalty clauses for any shortfall in waste delivered. Negligible risk for the banks. Every risk for the public - especially if consumption and waste rates go down, or recycling rates rise. Not to mention the mind-boggling costs of setting up the deals in the first place.

Given, too, that the banks' new found reluctance to lend is now having to be shored up by government guarantees against loss, the whole case for PFI is shown to be doubly flawed - high risks are transferred the public at both local and national level.

We've been set up. Look at it from a council treasurer's viewpoint, and PFI still offers government (i.e the nation's taxpayers') cash to offset against locally raised capital. Attractive, eh? But all it means is that we're paying through taxation for PFI schemes nationwide, instead of just paying locally for local schemes. For councils the choice might look easy - but for individuals we'd all be far better off without PFI. We'd have far better waste disposal too.


Chris Hutt said...

Good post. At last I think I understand what PFI is supposed to be about and what it's really about. you have a knack for picking out the bones and making it all too clear.

It seems to me that central government funding of local schemes often has a distorting effect on local decision making (for good or ill).

Pete Goodwin said...

When I first came across the incinerator issue, I thought it was about dioxins and the other nasties that can spread across the district.

Then they actually built a new one near where I lived, and it turned out the real problem was their insatiable appetite for waste - a local Waste Management Officer was forced to publicly complain that he found himself 'in the business of waste maximisation'.

Evidently I was wrong both times. Now I know it's really about 'bankability'. Everything else is irrelevant.