Town hall bosses across the region have entered into a raft of ‘buy now, pay later’ agreements since the turn of the century using PFI, where private firms fund the upfront costs of new buildings and are paid back over the next 25 years or more.
The majority of Yorkshire’s local authorities will be paying back millions of pounds a year in ‘unitary charges’ well into the 2030s, by which time the total spend will dwarf the original construction costs.
Critics argue that PFI, which became widespread after Labour took power in 1997, is a more expensive way of funding public schemes than simply borrowing.
Many of the contracts end up being heavily subsidised by central government, prompting questions about whether they constitute good value for money for the public purse.
But supporters say the contracts bring many benefits, with the private contractor taking on the risks involved with a major project as well as providing maintenance and management of the new building. In total, 14 of the region’s local councils have signed PFI deals, with four, Leeds, Sheffield, Bradford and Barnsley, negotiating contracts for more than £1bn of tax-payers’ money.
Leeds City Council has signed 14 contracts, which will see more than £3bn paid back by the end of the final agreement in 2041 and a payment of £109m made last year alone.
Officials say that because central government pays for around two-thirds of these costs through PFI credits, the council has got an “incredibly good deal” from the arrangement.
The council’s deputy leader James Lewis said: “People aren’t just local tax-payers, they are national tax-payers as well, and there are some questions for central government about whether they secured the best value and took the best approach.”
Among the most controversial PFI schemes is Sheffield City Council’s £2bn Streets Ahead highway maintenance contract with Amey. It was claimed in court this week that healthy trees in the city were felled, causing widespread protests, because it was the most profitable option under the contract.
Dexter Whitfield, an analyst from the European Services Strategy Unit, said council leaders were effectively “put over a barrel” in the late 1990s and early 2000s and were forced to use PFI if they wanted to fund the building of new schools.
He said: “There has always been criticism of PFI, some of us have been arguing for a long time that it is a bad policy. Politically if you are a locally-elected member and build 15 new schools you can brag about it, it has political value.”