Why John McDonnell's PFI pledge is welcome and affordable

John McDonnell caused a stir yesterday with his pledge to bring Private Finance Initiative (PFI) contracts back in house. Commentators who bandy about huge sums of money to pay for this commitment are missing the point.

The shadow chancellor said in his conference speech that Labour had already pledged not to sign any new PFI deals. He then added: “We will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.”

Unsurprisingly, this was immediately welcomed by UNISON, who campaigned against PFI from the outset, whichever government (Tory, Labour and SNP) used the scheme. Dave Prentis tweeted, “At long last! Our party sees sense on PFI”.

Let’s start by understanding what a PFI scheme is. Instead of borrowing in the normal way, public bodies contract with a consortium of private companies known as a Special Purpose Vehicle, to design, build and operate a public asset - typically schools, hospitals, roads and waste treatment works. The Tories invented the idea, Labour developed it and the SNP use it in Scotland to this day – albeit renamed as NPD or Hubcos. Instead of meeting the borrowing and running costs directly, public bodies pay an annual fee to the contractors.

The scheme has been criticised on many grounds and in the early years the main driver was keeping capital projects off the public sector off the balance sheet. Particularly important in Scotland because of the block grant and led to the saying ‘it’s the only game in town’. 

The main problem with PFI is that the private sector can’t borrow as cheaply as the public sector, and of course take a profit. Government can now borrow very cheaply indeed and this had led to calls to refinance such projects. PFI schemes are notoriously secretive, but we know that they are paying interest rates of 7%+, at a time when public bodies could issue bonds at a little over 1%.

UNISON Scotland set out in our ‘Combating Austerity’ plan how this can be done and save millions of pounds of austerity cuts in the process. The Public Accounts Committee at Westminster, hardly a bastion of socialist economics, also highlighted how such refinancing had been achieved in England. Sadly, while some projects have been brought back in-house in Scotland, progress has been glacial, as our progress report this summer shows.

An important forerunner to any contract renegotiations should be stricter monitoring of contracts and restructuring the existing provisions. A number of public bodies in Scotland are beginning to take this seriously, but again more could be done. At UK level John McDonnell could help by committing to changing some of the Treasury rules that make refinancing more difficult than it might be.

That’s why the commitment from Scottish Labour leadership candidate Richard Leonard is so welcome. He said: “Scotland has a huge liability to PFI and the Scottish Government’s Non-Profit Distributing scheme. The Scottish Government could and should set up a debt disposal department dedicated to raising funds to buy out the total outstanding £28.8bn PFI and NPD debt on operational contracts. Doing this could save the public purse hundreds of millions of pounds. If I’m Labour leader I’ll be pressing them on this issue and as a Labour First Minister it will be a priority.”

McDonnell’s actual commitment is fairly modest and doesn’t commit Labour to a massive increase in public spending. That’s because the public sector is already paying over the top for these schemes, so bringing them in-house would actually be a saving to the public purse. As well as giving public bodies control over vital public assets.

Health & safety and the ageing workforce

With twice as many people working past the State Pension Age, we need to give proper attention to the health and safety implications of the changing workforce.

I have highlighted before our research into the ageing public sector workforce in Scotland. With the 50-60 age group expanding the fastest, around 40% of the workforce is likely to retire within ten years. This is reflected in the wider workforce, with one in three workers over the age of 50 by 2020.

Yesterday, I was speaking at the RoSPA conference in Glasgow on this issue.

I argued that we need to recognise that despite equality legislation, older workers face at best unconscious bias in the workplace, and at worst overt discrimination. This shows itself in attitudes towards training, development and promotion opportunities. The UK will have 7.5m job vacancies to be filled by 2022, and that's before the impact of Brexit. With one million 50-64 year olds unemployed, but wanting to work, we simply cannot allow their skills to be wasted.

As I said in a recent column in The Scotsman, we need to talk less about the demographic time bomb and more about the demographic dividend. We need to find ways of keeping older experienced staff and helping them to pass on their knowledge and skills.

That's not to say that we should ignore the health implications. Older workers are at risk of burnout, due to the physical and emotional demands of their jobs over a long period. We need to look at later life career changes, flexible working and develop a funded sabbatical policy.

Older workers have a lower incidence of short-term absence, but a higher risk of long-term illness. This needs to be reflected in sickness absence policies that have become increasing rigid in recent years. For example, workplace dementia will be a new condition for many employers to address. Some 3,200 workers under 65 have been diagnosed and this means that employers need a strategy that includes diagnosis, support and adaption. The Alzheimer's Society has a useful guide on this issue.

While there is no evidence that older workers are at greater risk in the workplace, there are some age related factors. Older workers are at marginally higher risk from slips and falls; physical strength and stamina declines with age; as does sight and hearing. However, I could produce a different list of risks with younger workers.

We therefore need to respond to the challenges and opportunities of an ageing workforce as we would for any other safety risk. By risk assessment and if necessary by redesigning jobs to reflect age factors. All the time remembering that older people are not a homogenous group, to be lumped together in a one size fits all response.

Overall, we need to change workplace culture to regard older workers as a positive gain to the workforce. This starts by raising awareness and developing a strategy. Such strategies need to recognise the health and safety implications - always remembering that work needs treatment too, not just the worker.