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West Midlands PFI projects set taxpayers back £12.7bn

Schemes such as Building Schools for the Future and Queen Elizabeth and Walsgrave hospitals have racked up a gigantic bill for the region

University Hospital in Coventry was the region's biggest PFI project

The cost to the public of paying off all the PFI projects in the West Midlands will be £12.7 billion, new data shows.

Schemes such as Building Schools for the Future (BSF) and Queen Elizabeth and Walsgrave hospitals have racked up a gigantic bill for the region, expected to cost £399 million in the next year alone, according to official figures.

The PFI (private finance initiative) bills have been branded “extortionate” by union leaders, while a West Midland MP has called for some to be renegotiated.

There are currently 26 schemes operating or in construction across the region.

Ravi Subramanian, regional secretary for Unison in the West Midlands, said: “Unison has always maintained that PFI is poor value for money for the taxpayer. The supposed risk sharing benefits hardly ever accrue as private companies threaten complex legal arguments to avoid penalty payments.

“PFI also locks in the public sector into contracts that means as services needs evolve over the years the taxpayer is then required to pay extortionate amounts for building changes and improvements.

“Given the government can always borrow at cheaper rates than the private sector it is simply ludicrous that type of public financing should continue.”

PFI is a scheme rolled out under the last Labour government where private companies build and maintain schools, hospitals, bridges and other important structures on behalf of the government. Public bodies are committed to paying annual fees in the millions to maintain various services around the region far into the future.

But Edgbaston MP Gisela Stuart (Lab) said the work on the Queen Elizabeth Hospital, run by the University Hospitals Birmingham NHS Foundation Trust (UHB) showed the merit of PFI.

Gisela Stuart MP(Image: Pic: Richard Maude)

The ‘superhospital’ became the first of its kind in the city since Birmingham Children’s Hospital moved to Steelhouse Lane in 1998.

Ms Stuart said: “PFI, when done well, was a way of injecting capital into the health service. UHB came in on budget and it is servicing its PFI deal well but, of course, there were some hospitals where it did not work as well.

“You have to find a way to leverage capital and it can be a way of getting investment.

“It depends if it is done well or not. PFI was actually a Tory idea in the early 1990s, but they couldn’t make it work. Eventually Labour did and it worked well in some cases and not in others.”

Ms Stuart said it had also played a vital role in generating wealth, through the growth of the life sciences sector in the city and Calthorpe Estates’ work attracting medical firms into the old BBC Pebble Mill site in Edgbaston.

The most expensive PFI scheme in the West Midlands is the contract for maintaining University Hospital in Coventry. The annual payment this year is £86 million alone. The data suggests that there is still another £3.3 billion to pay off on the 39-year deal.

The Queen Elizabeth Hospital will cost £60.3 million this year, with an estimated £2.8 billion still left on the 37-year deal.

Other PFI deals in the region include street lighting in Coventry and Walsall and highway maintenance in Birmingham.

Critics argue PFIs represent poor value for money for the taxpayer and saddle authorities with debt for generations.

Julian Knight, newly-elected Conservative MP for Solihull, said: “The main problem is that many of these deals seem to have been agreed under a Labour government when interest rates were running at nearly ten times their current levels and inflation was much higher. As a result, many of these PFI contracts look expensive from today’s perspective and hospital trusts need to be mindful of this should they wish to enter renegotiations.”

Additional research: Rob Grant

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