A senior Labour backbencher is seeking to have liabilities from schools and hospitals built under private finance initiative (PFI) deals scrutinised under a new budget responsibility bill.
Stella Creasy, who has tabled two amendments to the bill, said this would help highlight the scale of debt incurred. She also wants trade deals such as the post-Brexit arrangement with the EU to fall under its remit, arguing these can have an even greater fiscal impact.
The budget responsibility bill, promised in the king’s speech, is a direct rejoinder to Liz Truss’s catastrophic mini-budget, which was pushed through without any prior assessment by the Office for Budget Responsibility (OBR), the government’s fiscal watchdog.
Under the bill’s planned provisions, any “fiscally significant” government measure must first be assessed by the OBR, a measure known as the fiscal lock. The stated definition of fiscally significant is something costing the equivalent of at least 1% of GDP in any year during the current five-year forecast period.
That amounts to around £30bn, with the tax cuts in the Truss mini-budget totalling about £45bn.
Creasy is arguing that while no individual PFI contracts are that big, they should be seen cumulatively. Used mainly by Tony Blair’s government to pay for new schools and hospitals over several decades, with private firms building and maintaining buildings for an annual fee, they have resulted in many public institutions paying huge interest charges.
Overall there are £151bn of repayments due, with Creasy saying some NHS trusts were paying more on PFI debts than they spend on drugs.
Similarly, Creasy argues that the Brexit deal has been estimated to cost the UK economy more than £300bn by 2035 compared with remaining in the EU, another vast cost which, as it stands, would not be considered by the new bill.
“In these tight financial times every penny of public money counts. That’s why we need to put the costs of borrowing from the private sector and trade deals beyond political spin and on to the nation’s books, so that we can all see clearly whether such deals or debts are in the public interest,” Creasy said.
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“PFI has been a drag on the public finances for decades now – and some trade deals such as Brexit have cost us more than others which generate growth.”
Both PFI and trade deals were, she said, “examples of policies that individually may not meet the threshold in this legislation at present, but cumulatively can be horrifically expensive if we don’t know what we’re getting into”.
Creasy, the MP for Walthamstow in north-east London, added: “If we get this law right, never again should future generations wake up with a shock bill for the poor decision-making of their predecessors.”
Amendment to the bill will be debated next Wednesday. The Treasury was contacted for comment.