Labour threatens to end PFI contracts

Shadow chancellor John McDonnell has promised a radical review of all PFI contracts if Labour wins the next general election, saying "we'll bring these contracts and staff back in-house" in his speech at the Labour Party Conference in Brighton.

The CBI responded by saying Labour's plan 'will send investors running for the hills and puts misplaced nostalgia ahead of progressive vision'.

McDonnell said PFI has cost taxpayers over £28bn paid to private sector investors and shareholders. The Labour leader Jeremy Corbyn has previously said he wants to renationalise Britain's railways and free the health sector of PFI deals. Labour says it will review all existing PFI contracts and bring them back in-house if necessary. It's unclear how much this would cost, but with over 600 PFI contracts in place, it would likely result in a massive windfall for the private sector. In health estates, for example, typically as PFI deals end properties are still owned by the private company established to rebuild and run them. Government can extend contracts or buy the assets back into public ownership.

Some commentators, including the director of the Institute of Health and Society at Newcastle University, welcomed the announcement. She said to the Finacial Times: “The first step is to open up the contracts, look at the exorbitant interest rates and rates of return and put them in the public domain. That is what the Treasury should be doing.” 

Others pointed out that all PFI deals are different. Some will be a lot easier or a lot more costly to exit than others. McDonnell also reiterated Labour's intentions on renationalising rail, energy and water industries.

CBI director general, Carolyn Fairburn, said: “Where Labour has engaged with business – from Brexit and skills to infrastructure and innovation – solutions have been found to deliver an economy that is both more prosperous and fairer. The CBI looks forward to urgent discussion with the Labour leadership to find better solutions to the shared challenges we face.”