Privatisation and PFI – Building the Campaign

Back to all Motions

2018 National Delegate Conference
27 February 2018
Carried as Amended

Conference notes:

1)UNISON’s sustained opposition to privatisation and the private finance initiative for more than two decades;

2)The positive role played by UNISON in securing the motions opposing PFI at the labour party conferences in 2001 and 2002 as UNISON demonstrated the negative impact of such schemes; highlighting that PFI contractors were cutting the pay, pensions, sick pay, maternity pay of NHS porters, catering staff, facilities staff, security staff, and cleaners who had been forcibly transferred to them as the price of building a new hospital;

3)The Workforce Protection Codes and a secondment model for NHS PFI staff developed by Labour were subsequently abolished by the coalition government in 2010;

4)The campaign across public services against privatisation and the ‘two-tier’ workforce which have seen greater success in Wales with a Welsh Labour Government;

5)The mounting evidence showing the deficiencies of privatisation and that the Private Finance Initiative is the costliest form of contracting;

6)The support the General Political Fund has given to “We Own It” campaign to promote public ownership.

Conference recognises that the extent of privatisation and PFI schemes is different within the devolved nations.

For example, as at October 2007, a decade ago, the total capital value of PFI contracts signed across all public services was £56.9 billion. Of this, just £618m was in Wales, or £213 per head. This compares to £50 billion in England (or £1,017 per head), £5.2 billion in Scotland (£1,028 per head) and £1.1 billion in Northern Ireland (£631.4 per head).

Nevertheless UNISON branches continue to be faced with proposals that privatise public services or that are informed by business cases that are underpinned by assumptions about cuts to terms and conditions of new employees and reduced pension entitlement.

Conference believes that the National Audit Office (NAO) report into PFI and PF2 (January 2018) amounts is nothing less than a scathing indictment of a policy introduced in 1992 by Norman Lamont, Tory Minister and sadly continued by the subsequent Labour UK government, confirming the concerns raised by UNISON for more than 20 years.

In particular conference notes the NAO findings:

a)That after more than 20 years of PFI ‘There is still a lack of data available on the benefits of private finance procurement’;

b)The NAO found no evidence that PFI delivers operational efficiency – ‘Our work on PFI hospitals found no evidence of operational efficiency: the costs of services in the samples we analysed were similar’;

c)Costs were the same or higher – ‘Departments who responded to our 2017 survey question considered that operational costs were either similar or higher under PFI’;

d)PFI is a fiscal illusion –‘The Office for Budget Responsibility’s (OBR’s) July 2017 fiscal risks report cited the use of off-balance sheet vehicles like PFI as an example of a “fiscal illusion”. PFI can be attractive to government as recorded levels of debt will be lower over the short to medium term (five years ahead) even if it costs significantly more over the full term of a 25–30 year contract’;

e)PFI adds extra costs – ‘Private finance procurement results in additional costs compared to publicly financed procurement, the most visible being the higher cost of finance…. some 2013 deals, agreed when credit market conditions were poor, projected an annual return for debt and equity investors of over 8%; this was more than 5% higher than the cost of government borrowing at the time’;

f)PFI can add even more costs – ‘There are other areas where the private finance model can result in additional costs and also ways in which it differs to the approach HM Treasury would usually recommend. These include: Insurance, Cash management, Costs of external advisers, Fees to lenders and SPV management and administration fees’;

g)Publicly financed alternatives cost less – ‘The higher cost of finance, combined with these other costs, means that overall cash spending on PFI and PF2 projects is higher than publicly financed alternatives’;

h)Inflexibility is a drawback – ‘In our 2017 survey departments reported that operational inflexibility was a drawback of PFI’.

Conference further believes:

i)That in the wake of the revelations following the liquidation of Carillion it is time to reassert the need for the public service ethos in the delivery of public services. It is over twenty years since the Nolan Committee published the seven principles of public life – selflessness; integrity; accountability; openness; honesty; objectivity and leadership. We now need an equivalent set of principles that will apply to any private company, its management and directors, that receives public money to deliver public services;

ii)Selflessness and integrity means there can be no place for companies using tax havens, and the framework for boardroom pay must incorporate a public service ethos and require full disclosure;

iii)Integrity also means that there can be no place for companies involved in blacklisting workers, as Carillion admitted (an unlawful act in Wales introduced by a Welsh Labour Government); or those that seek to undermine workers bargaining rights, generate profits by attacking pay and terms and conditions, and forcibly turn over the workforce to cut pension entitlements;

iv)The principles of accountability and openness require full transparency with all procurement information available online, including tender documentation, bids and all signed and amended contracts. Freedom of information requirements would be written into contracts alongside the open book accounting called for by the National Audit Office;

v)The quality of the service would be critical, and when failure occurs procurement frameworks would ensure speedy intervention preventing situations such as those at the Great Western Hospital Trust in Swindon which in 2014 reported that, “Concerns about food hygiene and cleanliness, have posed a potential risk to patients, visitors and staff”, but the Trust was powerless to intervene as “Carillion were contracted to provide these services by Semperian – effectively the ‘owners’ of the building under the PFI agreement”;

vi)The principle of honesty requires propriety is both rigorous and demonstrable;

vii)If companies delivering public services are to fulfill the principles of objectivity and leadership they must be at the forefront when it comes to equality and sustainability and that;

viii)The primary motivation for the provision of services must be the public interest, not the pursuance of profit.

Conference calls on the National Executive Council:

A)To work with the TUC, STUC and WTUC, political parties and civil society organisations for a complete rethink of outsourcing and PFI, for a root and branch review, for a Doomsday Book of significant contracts (at national and local level) and for the evaluation of performance across the plethora of contracts that an individual company may hold, for in-house provision to be the default option for public services and for new criteria for decisions by public bodies, writing into contracts Freedom of Information requirements, involvement of public and staff, transparent reporting of profit, labour and living wage clauses, union recognition, compliance with fair tax and boardroom remuneration;

B)To continue to oppose privatisation and PFI and to highlight the deficiencies and how the public interest becomes secondary to meeting PFI obligations;

C)To highlight the role of debt and financial engineering in company structures and privatisation, for example in the provision of social care;

D)To highlight the work of the trade unions and the governments in the devolved nations, including the Welsh Assembly Government in delivering services in-house;

E)To work with the TUC, STUC and WTUC, political parties and civil society organisations to create a modern model for public sector delivery of public services, for service quality and efficiency, for skill development and capacity building within the public sector to ensure that there is a public sector alternative for the construction and delivery of public services.