The collapse of Carillion has opened up the question of the outsourcing of government contracts, and the issue of the Private Finance Initiative, started under John Major, used extensively by Blair and Brown, and let rip under the Liberal-Tory and current Tory governments. But, in response to it, it has also led to some woolly thinking.
Marxist Advice To Capitalists
Some years ago, I responded to comments from Mike McNair, and others in relation to the question of PFI. In the post, I had argued that, it is not the job of Marxists to advise the capitalist state on the most efficient means of it raising the money-capital required to undertake its activities, and so we should not argue either for or against the use of PFI's. Mike commented,
“Why oppose PFIs? The answer is simply that you get less school/ hospital/ railway for more money than by the state borrowing and building them, so that PFIs are just the state taking the difference in tax (which comes from the petty-bourgeoisie and working class as well as from the bourgeoisie) and handing it out to a small group of construction companies as a non-transparent subsidy.”
The collapse of Carillion - and a number of other companies, involved in such PFI contracts, appear to be in a similar situation - shows that, if that was the intention, it failed pretty miserably. As I pointed out to Mike back in 2009,
“The reluctance of many construction companies over recent years to enter into PFI's, also suggests that in reality there is not a great deal of subsidy hidden or otherwise, as was first envisaged either.”
Looking at the situation today, with UK 10 Year Gilts trading at a yield of only 1.4%, it looks a no brainer to finance such schemes by issuing government debt. However, having done so, some of the construction schemes are so big that the construction project would still have to be let out to private companies. The inevitable cost overruns, running into billions of pounds, as has already happened with HS2, then falls on the government purse, rather than that of the private company. When Labour came to power, in 1997, even that was not so apparent. 10 Year Gilt Yields stood at between 7% - 7.5%, and even into the early 2000's, 10 Year Yields were standing at around 5%. So, the cost of borrowing, only then to still have to let the actual work out to a large construction company, and with all the risk put on the government's shoulders was not such an obvious choice.
But, the important point here, as I also pointed out, in response to Mike is,
“If it was then shown that actually using PFI WAS, a far more efficient means of providing schools, hospitals etc. or that privately run schools and hospitals were more efficient, and consequently that taxes could be reduced significantly, would you then using the basis of your argument here, be arguing fervently that the State SHOULD adopt such methods of funding its activities????”
In other words, precisely by getting into the question of how the capitalist state should finance its activities, you end up getting distracted from the real issues. As I pointed out back then, there is no more reason for Marxists to advise the capitalist state to finance its activities by taxation, rather than borrowing, or by public borrowing rather than PFI, than there is for Marxists to advise a private capitalist to raise the money-capital they require by issuing shares, rather than bonds, or by a bank loan! Our job is not to advise capitalists on how to run capitalism more efficiently, but to argue for a different system to capitalism altogether. At best, we might want to point to such activities by individual capitalists, their representatives, or the capitalist state as examples of blatant corruption, of feathering of nests, and of rank incompetence, but even in respect of some of these, it is not necessarily clear where the actual truth lies.
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