From attacking PFI to forcing it on her own constituency, and back again – the Labour leadership hopeful just can’t seem to make her mind up, explains SOLOMON HUGHES
YVETTE COOPER was praised for putting some oomph into her competition with Jeremy Corbyn for Labour leader when she described his economic proposals as “like PFI on steroids.” Her argument, made during the Channel 4 News leaders debate, was called “scathing” and “impassioned” by Cooper-friendly newspapers. Which is basically all of them.
That’s the soundbite politics, but what does it mean for Labour’s actual economics? What does this say about the Labour centre’s attitude? I don’t mean their attitude to Corbyn — we know that all too well. But what is their attitude to the private finance initiative (PFI) ? It is still hard to tell because Cooper has been, in short order, a serious critic of PFI, a minister who promoted PFI and now a shadow minister who seems to think PFI is something of an insult.
The PFI was a Tory policy New Labour made its own. Instead of the government paying for new schools or hospitals or other bits of the welfare state, the Tories decided to get banks to take them over. The City raises the cash to build a school and the government rent it back off them over the next 20 or 30 years. It looks like “free money,” but has two very bad effects. Firstly, private borrowing is always much more expensive than government borrowing, so the schemes end up being much more expensive in the long run. Second, if private firms are arranging the deals they always give the work to other private firms — so the PFI hospitals and schools handed over formerly public staff like school cleaners or hospital caterers or council janitors to private companies.
By turning the Tories’ few PFI schemes into a massive boom, the 1997 Labour government left us with £220 billion debts and handed many public assets over to firms like Carillion and Interserve.
I don’t know why Cooper thinks PFI is an insult. Does that mean she doesn’t like the scheme anymore?
That was certainly once the case.
Back in 1996, when the Tories were in power, she was the chief economics writer of the Independent. And a critic of PFI.
In November 1996 she wrote in the Independent that “PFI deals are supposed to be ‘off the books’ but there is increasing anxiety that they commit departments to a long stream of payments to private contractors well into the 21st century.”
In September 1996 Cooper criticised Tory underinvestment in infrastructure and the way they tried to put PFI in its place. She wrote in the Independent: “Cutting investment lowers future returns, and stores up bills for repairs — pushing up the need for current spending in the future. Meanwhile, the PFI may be creating new liabilities in future, as we pay rents for the buildings and infrastructure that the private sector built. Either way, we are creating bills and problems for future generations.”
But when Labour moved from opposition to government, Cooper backed the very PFI schemes she had warned against. She was a junior health minister under Alan Milburn from 1999-2003 when he announced: “We need to advance the private finance initiative,” expanding the scheme vastly. When Milburn was busy, it was Cooper who announced the wave of PFI hospitals now squeezing cash out of the NHS.
Cooper also backed PFI in her constituency. In 2007 the government launched a £300 million PFI scheme to replace Pinderfields Hospital, Pontefract General Infirmary and Clayton Hospital in her West Yorkshire constituency. The PFI deal handed the new hospital to Balfour
Beatty. Cooper said it was “great news that this deal has now been finalised. These new facilities will make a big difference.”
Over time the news has looked less great. In October 2014 Balfour Beatty made a £42m profit by selling its share in the PFI to a bank. The windfall profit shows it was wildly overpaid for the deal in the first place. At the same time the hospitals trust was struggling to pay the annual charges on the PFI, leaving it with a deficit of around £20m. It tried balancing the books with redundancies and pay cuts. The hospital struggles to run its A&E services and maintain enough beds.
As housing minister, Cooper pushed PFI. From 2003 Cooper was a Minister in John Prescott’s office, in charge of housing, then from 2007 on as a housing minister.
She ran New Labour’s policy, sometimes called “the end of council housing.” Blair and Brown’s Labour did not want councils to build any houses. They did want to improve the existing council houses, improving kitchens and bathrooms. But they wanted this work to be done by transferring control away from councils. This particularly involved “stock transfer” — councils handing over estates to new housing associations. Cooper said councils could hang on to their own stock, but only if they use a “PFI scheme, as an alternative to transferring their stock.”
The overall record of the Labour government on council housing was very poor — the new housing associations didn’t add many houses, leaving us with a shortage.
The record of PFI in council housing was even worse.
In 2010 the National Audit Office (NAO) examined the housing PFIs Cooper championed. It found that “most projects have suffered significant cost increases and delays.” More than half the schemes they looked at had price increases of “over 100 per cent.” The councils had no choice but to use PFI as it was the “only available route through which they could secure the funding.” Overall, the NAO said, “the department cannot demonstrate that the programme has achieved value for money.”
So the old Cooper who criticised the PFI was proved right by the new Cooper who promoted it. Perhaps the newest Cooper has now realised she was right before she was wrong. It’s hard to be sure. We are still left with the question: when it comes to PFI, will the real Cooper please stand up?