#lab17

Clement Attlee, Margaret Thatcher, Jeremy Corbyn. The first two led transformative governments that established a new political settlement in Britain: and make no mistake, the Corbyn project’s aspirations are no less ambitious. Attlee sought to overturn a failed system that delivered the great depression, the hungry 1930s and a genocidal world war. The Tories resigned themselves to the underlying assumptions of Attleeism, much to Thatcher’s chagrin. British politics became a “socialist ratchet”, she claimed, while the Tories merely “loosened the corset of socialism; they never removed it”. Thatcher strove to use a crisis spurred on by a global oil shock to smash Attlee’s consensus: this time, it was Labour’s time to surrender, with Tony Blair described by Thatcher herself as her “greatest achievement”.

Both Attleeism and Thatcherism had iconic moments that came to represent the bankruptcy – as they saw it – of the system they replaced. Postwar social democracy had the Jarrow hunger marches of the 1930s. Thatcherism had the winter of discontent. For Britain’s ascendant new left, it is the horror of Grenfell Tower: dozens of working-class people killed in a society that prioritises profit not just over people’s needs and aspirations, but even their lives.

“It stands for a failed and broken system,” Corbyn declared to rapturous applause, “which Labour must and will replace.” Labour had a “new model of economic management”, and it would “replace the failed dogmas of neoliberalism”. Labour’s mission was not simply reversing austerity, “but to transform our economy with a new and dynamic role for the public sector”. Democracy would be brought to the economy and the workplace, in an attempt to realise “a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families”, as Labour’s 1974 manifesto put it.

The political wisdom of our time has been this: unless you accept lower taxes on the rich, an ever-expanding role for the private sector, deregulation, a limited role for government, weakened trade unions, and so forth, you are rendered unelectable. This was called the “centre ground”. But, as Corbyn noted, the “political centre of gravity isn’t fixed or unmovable”. Attlee audaciously ripped up the political mantras of his era – usurping power from a wartime hero no less. In the 1945 general election campaign, Winston Churchill even hysterically argued Labour would “fall back on some sort of Gestapo” to implement its policies.

Thatcher, too, rebelled against a consensus whereby Tories fought elections “largely on policies which 20 years ago were associated with the left, repudiated by the right”, as Labour’s Tony Crosland hubristically declared in the 1950s. Both Attlee and Thatcher had to confront those in their own party who were wedded to the certainties of the old system. Attlee expelled Labour MP Alfred Edwards for rebelling against the nationalisation of steel, while Ivor Bulmer-Thomas jumped before he was pushed; Thatcher had to confront the Tory “wets” who believed a break with Keynesianism was neither politically possible nor even desirable. The parallels with Corbyn’s Labour hardly need stating.

The calamity of the great depression and the second world war ushered in Attleeism; rampant stagflation was the midwife of Thatcherism. At the time of the 2008 financial crash there was a widespread misplaced schadenfreude on the left. Surely market fundamentalism had been discredited; surely the west’s ruling economic elites – and their political representatives – would be held to account; surely the left would rise from the ashes. Instead came a tidal wave of austerity, devastating attacks on the remaining social gains of social democracy, and the poison of rightwing xenophobia.

Shadow Chancellor John McDonnell said today that the next Labour government would not only halt future PFI projects (as promised during the last election) but look into bringing existing ones “back in-house” under public control. The ‘value for money’ of PFI has long been debated with everyone from the TUC to the British Medical Association to the Spectator putting the boot in on “perfidious financial idiocy”.

Basically private contractors front the costs of building hospitals, schools etc. and then get payments by the taxpayer for using ‘their’ buildings, as well as upkeep of services like cleaning and security. PFI contracts last upto 35 years before the goods are handed over.

What do the numbers say? Is PFI value for money?

Let’s look at the NHS. Its the most visible recipient of PFI to the public and the press as it mainly involves building stonking huge new hospitals. The NHS though the largest ‘customer’ only makes up 21% of the capital value of PFI in Britain, the MoD and Transport use it for infrastructure and then there’s Education building schools and some others. Using the 2015 Parliamentary Report on PFI, the capital value the health service has gotten out of PFI is £11.8 billion across 105 projects.

The unitary charges -rent- paid for these projects in the 2015/16 tax year was £1.9 billion over 10% of the capital value. The total unitary charges expected to be paid out on NHS-related PFI after the 2015/16 tax year? £62.9 billion.

Holy shit. Why so much?

A large chunk is the interest on these long-term repayments which rose after the Crash. Another factor is simple: profit. The state uses private contractors all the time - “build this big thing”. PFI is not a simple construction contract, the investors own the -for example- hospital for decades after they’ve built it. During this time they expect to make money from the contract. The average rate of return for a project is 13.5% with the high end going upto 20%. The most extreme example is the Norfolk and Norwich PFI Hospital which was making returns of 16% before some refinancing jiggery-pokery shot that up to 60 fucking percent.

So PFI in the long run is pretty damned expensive.

So does McDonnell’s plan to cut existing contracts short make sense? After all most PFI contracts are not due to end until 2030-35 and there will be a price for opting-out early.

Frankly it would be in the short-term very expensive if it was done all in one go (not likely) but would also save us the taxpayer a fair chunk in the long run. There have been examples of early opt-outs on an individual level to give us a some ideas of cost versus benefits.

In 2011 the Tees, Esk and Wear Valleys Mental Health Foundation was the first to enact “voluntary termination”. It paid out £18 million to do so, saving an estimated £14 million by 2034 when the contract would have ended. A saving of roughly 44%.

In 2014 the Northumbria NHS Trust bought out its PFI contract set to end in 2033 for £24 million plus £4 million in compensation. After those costs it will save the Trust £67 million. A much tidier 70% saving.

However not all contracts are created equal and it wasn’t until around 2005 a standardisation for them was seriously pushed through. And PFI began in 1992. Also these are quite small contracts by PFI standards, central government would need to chip in.

So…  in the name of fag packet guestimation, lets take the lower saving of 44% across the NHS. If that held it would cost the Treasury £41.5 billion to write off PFI in the health service for a long-term saving of just over £27 billion by circa 2035 for an annual average saving of £1.5 billion. Roughly. Very roughly.