PFI albatross opens NHS up to private sector

The resource-draining Private Finance Initiative (PFI) foisted on public sector projects by New Labour is helping to create the conditions for the break-up and privatisation of the National Health Service.

The evidence is to be found in two reports over the last 48 hours – from a special administrator appointed following the financial failure of South London Healthcare Trust and today’s report from the Commons’ public accounts committee.

Yesterday, a special administrator recommended that South London Healthcare Trust should be broken up in the wake of its financial failure. The Department of Health should write off £207 million worth of debts built up by the trust driven to the brink of bankruptcy by PFI deals, the administrator said.

It should also provide up to £25 million extra per year to help continue pay for PFI deals. Two of the trust’s three hospitals were built under Labour using PFI funding. The trust plans to slash its workforce over the next five years, from 5,838 whole time equivalents in March 2012 to 4,755 in March 2016.

Administrator Matthew Kershaw said the money spent on PFIs accounted for around a third  of the trust's £65 million overspend in the last financial year. Nine bids had been made to take over the trust’s work. The private sector is ready to pounce, with bids from Virgin Care, Circle, Care UK, Capita and Serco already made.

The PFI albatross is dragging trust after trust into deep financial crisis, at a time when they are supposed to find £20 billion in “efficiency savings” (demanded by the previous government) and when the NHS is being reorganised by the ConDems to create market opportunities for the private sector.

Margaret Hodge, a member of the previous government and now chair of the PAC, presumably saw no irony in agreeing the committee’s report, which says:

“A number of trusts in financial difficulty have PFI contracts with fixed annual charges that are so high the trusts cannot break even. Paying these charges is one of the first calls on the NHS budget and the Department [of Health] is liable for supporting all PFI payments because it underwrites the Deed of Safeguard given to contractors. It already expects to have to find £1.5 billion to bail out seven trusts facing problems with PFI repayments over the remaining life of their contracts - equivalent to £60 million a year… The priority given to meeting PFI annual charges inevitably distorts priorities which is especially worrying at a time when resources are constrained.”

The rising cost of over 650 PFI projects hit £230bn this summer and won’t be fully paid off until 2048, according to a GMB union analysis of the latest Treasury data. Including the £44bn already handed over for PFI schemes up to 2009-10, the public purse will be hit with a total PFI bill of more than £270bn which is almost five times the value of the assets built (£56bn), says the union. “It means that British PFI debt is now equivalent to £9,300 per taxpayer. Annual payments are forecast to break the £10bn mark by 2017-18.”

The way that PFI contracts are framed puts them in a weak position when it comes to renegotiating deals, which can involve interest payments in double figures and exorbitant one-off charges just getting the contractor to change a light bulb. So trusts are locked into paying unaffordable PFI payments.

  

With another 20 or so NHS trusts in dire financial straits – despite an emergency £1 billion bail-out last summer – the private sector is licking its lips. The “failure regime” imposed on South London Healthcare is expected to be used at other trusts, with bids being taken for the continuation of services.

While PFI projects – under which contractors own the assets and lease them to the public sector – began life under the Tory government 1992-97, they were greatly expanded under New Labour by chancellor Gordon Brown. They were seen as a wheeze to build hospitals and schools on the never-never, without showing up as public spending, while giving the private sector a stake. The chickens have come to roost, however, and the NHS is being lined up for auction as a result.

Paul Feldman

Communications editor

Miliband takes union cash - and does a runner

In the summer of 2010, some union leaders met together and decided that they could buy their way to happiness by backing Ed Miliband’s campaign to become the new leader of the Labour Party.

With the help of the three major union bureaucracies of the GMB, Unite and Unison, Miliband squeaked home ahead of his brother David, who enjoyed most of the support from constituency parties.

Money down the drain, throwing good money after bad, a bad investment, a gamble that went wrong. All these phrases describe what has happened since. Miliband, to no-one’s surprise except that of the union leaders’, has become little more than Blair Mark II.

In fact, Miliband’s speech speech to the Trades Union Congress today was uncannily Blair-like in its content. “You know the new economy that emerges from this crisis must be built on foundations of co-operation, not conflict, in the workplace,” he said.

Co-operation? Trade unionists are being sacked in their thousands and/or losing hard-won rights and working conditions. Many are victims of cuts imposed by Labour-led local authorities.

If delegates were expecting some support for their upcoming struggles, they were soon disabused. Miliband acknowledged that Labour backed public spending cuts in the order of 12% (rather than the Tories’ 20%), defended opted-out academy schools and the Coalition’s new free schools.

And, naturally, Miliband repeated his assertion that strikes by civil servants and teachers in June against government attacks on their pensions were wrong and indicated he would take the same position in the event of more industrial action

Some delegates heckled during Miliband’s speech and Paul Kenny, leader of the GMB, struggled to find words of comfort for his hard-pressed members. In one of this week’s more vacuous statements, Kenny said:

"As Labour Leader he is not embarrassed by his association with trade unions and trade unionists. His engagement with trade unionists on the ground will bring to the fore what needs to be done to get the economy moving and to bring fairness to our communities."

Thank you and good night is all you say after reading that!

Even Bob Crow, general secretary of the Rail Maritime and Transport union, appeared to pull his punches, saying afterwards that "Ed Miliband needs to decide just whose side he is on” and warning the Labour leader that he was on “political suicide mission”.

The stark truth is that Miliband knows which side he is on – and it isn’t that of trade unionists and workers in struggle. Labour became a full partner of globalised capitalism back in the 1990s and stands by that position.

For the Milibands of this world, there is no alternative to rescuing the broken market economy to create the “prosperous capitalism” that the Labour leader called for in a speech earlier this year.

Were Labour in power now, you would hardly notice the difference between their policies and those of the ConDem government. In fact, many of the Coalition’s policies are a development of what New Labour did to the NHS and the welfare state.

Labour is happy taking the money from the trade unions to finance the party - and then doing a runner with it. Union leaders from Unite, Unison and GMB know this. But they are in denial mode.

Their members don’t have that luxury, however. Their jobs and pensions are on the line and they are waiting to see if, behind all the militant speeches, their leaders are actually prepared to do battle with the government.

Not having Miliband on their side is excellent news for the rank and file. The fact is that the alternative to the Coalition is not Labour (or any other combination of parliamentary parties). What is demanded is a democratic political system that responds to people’s needs. Achieving that goal will require independence of thought and action.

Paul Feldman

Communications editor

Manchester's councillors have lost their legitimacy

While Labour was preparing to celebrate retaining its seat in the Oldham bye-election, half an hour down the road in Manchester its councillors were announcing 2,000 redundancies from April. In practice, they are doing the government’s dirty work for it – with the support of the national party led by Ed Miliband.

He has sent union representatives around the country to tell Labour councillors, to their relief, that they should blame the Coalition for the cuts but do nothing that might take them outside the law. In other words, they should make a “balanced budget” (councils are not allowed to run a deficit, unlike the government) and stay in office.

In the end, of course, holding on to political positions for their own self-interest is what Labour is all about since Blair and Brown transformed it into a party that sponsors business interests, the financial sector, private-public partnerships and corporate-driven markets.

Any councillor who had even a smidgen of concern for Manchester city council’s workers and their families would have declared that the cuts, which follow on from the savage reduction in government grant, were impossible to support. The councillors could have turned the famous town hall into a fortress and challenged the government to come and do its worst.

Of course, that was never going to happen, especially as national union officials, who knew what was on the cards, stayed silent until the news broke. Sir Richard Leese, leader of the Labour-controlled authority, while complaining about the “unfairness” of it all, announced that the authority would slash £110 million of its budget for 2011-12 and axe almost a fifth of its workforce. Resistance had not even crossed his mind.

The predictable response from union officials was … predictable. Unison leader Dave Prentis, said: "The shockwaves of 2,000 job losses will spread across the city of Manchester and beyond. It is a tragic loss to workers who will have to break the news to their families that they are losing their jobs. It is also a bitter blow to communities who will lose services they rely on and will hit local businesses and trade."

And that was that. No call to action, nothing, nada.

Unite regional officer Keith Hutson admitted that the cuts would have a “devastating effect on services and the people that use them." He threatened – wait for it – a “consultative ballot” on industrial action. That’s a consultation on whether to hold a ballot for action. By the time that’s sorted, the jobs would have gone.

Which puts incoming Unite general secretary Len McCluskey’s remarks on BBC Radio 4 this week into perspective. McCluskey has been talking loudly about industrial action against the cuts. But when it came to the crunch, McCluskey rejected any intention of bring down the government and insisted: “It's all about getting the government to change its mind" and instead of making cuts, "go for growth". With the global capitalist economy increasingly heading south, he can dream on.


His assertion that the deficit is “not high” is equally rubbish. On a number of measures, Britain’s budget deficit is the most serious of all the major capitalist economies. It reached £162 billion in 2009- 10, which represents 11% of national income (GDP), the highest of the group of 20 leading capitalist economies.

Meanwhile, jobs are disappearing rapidly. The GMB union said a total of 113,765 jobs were now under threat at 145 councils across Britain. Councils implementing Coalition cuts have lost their legitimacy. Manchester workers should take a leaf out of the books of the students and occupy their workplaces, including the town hall. That would be a major step towards creating People’s Assemblies in Manchester and elsewhere to defend every job and service and develop alternatives to the present failed social system.

Paul Feldman
Communications editor

Attack on living standards intensifies

Share and commodity prices are soaring as speculators endorse the global assault on living standards by corporations and governments.

Raising the VAT rate in Britain to 20% - its highest ever - comes as prices are rising out of control, further undermining the value of wages, salaries, pensions and benefits. The lower your income, the more badly affected you will be.

If the private sector employs any of the hundreds of thousands of workers now on their way out of public sector jobs it’ll be at much lower wages, with poorer working conditions and without pensions.

They’ll be in good company. Workers throughout the world are being forced to work harder for less money, whilst unemployment has soared, according to Wage Policies in Times of Crisis, a new report from the International Labour Organisation.

Since the crisis erupted in 2007 and 2009, the world’s 1.4 billion salaried workers have suffered a decline in wage growth - unlike the stratospheric bonuses enjoyed by traders on the global financial markets.

Across the world, real wage growth slowed from 2.2% in 2007 to 0.8% in 2008 and 0.7% in 2009. But real wages – taking inflation into account – actually fell in 12 of 28 industrialised countries in 2008 including Australia (-0.9%), Germany (-0.4%), Italy (-0.7%), Japan (1.9%), Mexico (-2.6%), S. Korea (-1.5%) and the US (-1.0%).

In 2009, real wages fell further in Germany (-0.4%), Mexico (-5.0%), Japan (-1.9%), and S. Korea (-3.3%), whilst workers in France (-0.8%), the U.K (-0.5%), and Russia (-3.5%), also saw wages fall. Wage cuts hit workers in Hungary, Thailand, the Philippines, Malaysia, Jamaica, Botswana, Bahrain, the West Bank and Gaza. Among the worst affected were those in the Ukraine, where wages fell by 8%.

In the decades leading up to the crash, though wages increased, workers had to work far harder for their money, and received a declining share of the value they added. During the debt-fuelled growth of powerful global corporations from 1980, the share of value added by factory workers that came back to them in wages fell in most countries.

Wage growth lagged far behind productivity increases in most countries of the world, but particularly the industrialised countries. In the US, for example, between 2000 and 2009, labour productivity grew by 13%, whereas real average wages grew by only 2.2%. In Korea, whilst real wage growth was much stronger – at 18.3% between 2000 and 2009 – it was still way below the growth in labour productivity of 27.4%.

With the global economy in recession, the attacks on wages are certain to accelerate as corporations and governments pursue the cause of profit. Computer manufacturer Dell, for example, is moving operations inland in China in search of even cheaper labour.

Price rises are eroding wages even faster. In Britain, food costs have risen 5.5% over the past 12 months, outpacing the overall inflation rate of 3.3%. Wheat prices have just reached record levels, which is forecast to increase the price of a loaf of bread.

Unemployment is soaring, with the jobless total over reaching 210 million worldwide, adding to the pressure on wages. The GMB union today forecast that 200,000 jobs would be culled between now and April as a result of cuts in local authority spending.

With many US states including California, the eighth largest economy in the world, joining much of Europe on the edge of a new financial meltdown, the prospects for a “return to growth” in the capitalist system look remote. What is certain, however, is that the exploitation of working people in every country will increase day by day.

Gerry Gold
Economics editor

Bosses attack as union leaders run up white flag

The sacking by the Total corporation of 900 construction workers at the Lindsey oil refinery in Lincolnshire last night, who were on strike in defence of their jobs, is part of a growing employers’ offensive against trade union organisation which is also behind today’s strike by 8,000 postal workers in London.

The 900 were constructing a new plant at the refinery in Lincolnshire and were part of about 1,200 contract workers who had taken strike action in a dispute over jobs when, as one part of the project ended, 51 redundancies were announced. Shop stewards say that normal practice would have been to offer the workers vacancies on other ongoing contracts on the site but this was not done.

Victimisation is suspected because the 51 worked for Shaw, the contractor that was at the centre of the dispute earlier this year about the employment of foreign labour. Managers started hiring Italian and Portuguese workers. This sparked walkouts at refineries, gas terminals and power stations across the country.

The strikes at Lindsey have spread to other power stations at Drax and Eggborough in Yorkshire and Ratcliffe in Nottinghamshire, and BP's Saltend refinery near Hull. Workers have also walked at the BOC oxygen plant at Scunthorpe, Fiddlers Ferry in Cheshire and Aberthaw in south Wales, the trade union Unite said. Energy company E.ON said up to 150 contract workers at the Ratcliffe-on-Soar power station also walked out in support of the Lindsey oil refinery strike.

Total, the French-based global oil corporation, directed its main contractor to end all sub-contracts on the project, thus terminating the employment of all 900 workers involved. They were vulnerable to unilateral action by the company because officials from the GMB and Unite unions had refused to make their strike action official out of fear of the restrictions imposed by anti-union legislation.

In fact, the company said the workers had been involved in "an unofficial, illegal walk out" that was "repudiated" by both Unite and the GMB union. All a spokesman for Unite could say was: "We are extremely concerned about the ramifications of the employer's actions. We are urging all parties to get back around the negotiating table to resolve this situation." Not exactly fighting talk and unlikely to concern Total.

Meanwhile, the Communication Workers Union (CWU) said up to 8,000 members in London were due to walk out this morning with workers in Scotland due to strike on Saturday. The union has accused Royal Mail of cuts which break a national agreement and threatened modernisation. Deputy general secretary of the CWU Dave Ward said: "We are now seeing cuts but not modernisation in the postal industry and there's only so long before this is going have a major impact on services.”

Here again, union leaders are begging rather than fighting. They have offered the employers and the government a three month no-strike deal if they agree to work with the union on modernisation and, according to Ward, “move to get the company on a sound footing for the future".

The Lindsey sackings and the postal workers’ struggle demonstrate that the refusal of union bureaucrats to fight the employers and, in the case of the CWU, the government which is going ahead with plans to part-privatise the service, is one reason why unemployment is soaring throughout the country. Employers are aware that union “leaders” live more in fear of the anti-union laws than them and are acting accordingly to impose the economic crisis on the backs of workers.

Ending the wretched system of sub-contracting in the construction industry and defeating New Labour over privatisation requires policies of social ownership and workers’ control of the corporations and the mail service – and leaders that will fight to carry them into practice.

Paul Feldman
AWTW communications editor

A profit-and-loss government

You can’t argue that this government hasn’t got its priorities clear. New Labour commits up to £100 billion to propping up the failed Northern Rock bank in a desperate bid to keep the financial system intact but won’t spend relatively smaller sums to maintain disabled workers’ jobs or keep post offices open. In these cases, “commercial considerations” come first, second and last above those of the community at large.

So when union officials met Gordon Brown last weekend in a last-ditch effort to save jobs at Remploy, which is government subsidised, they got nowhere. Disabled workers at factories around the country will see their plants close down for good this week as a result. Factories in York, Hartlepool and Brixton were put up for sale last week while workers were still inside them. In all, 28 plants employing more than 1,600 workers are set to close because the government says they “do not give value for money”. Some furniture production is heading from Sheffield to Bulgaria, where wages are lower.

Meanwhile, the closure of 2,500 post offices is going ahead at speed, ignoring protests throughout the country and a petition organised by the National Association of Sub Postmasters, which drew more than two million signatures. The government says they are making “unsustainable" losses of £200m a year, a drop in the ocean compared to the financial support given to Northern Rock.

The charity Help the Aged has launched an attack on the government's "decimation" of the network, warning today that many more branches may end up being closed. The Post Office could lose the right to hand out pensions and other benefits. This would cut down the numbers of customers and make thousands of remaining branches unprofitable. The Post Office has already lost the right to supply key services, including passports and television licences. At present, 4.2 million people, including 1.7 million pensioners, receive their benefits via the Post Office Card Account, which is going out to tender. David Sinclair, Help the Aged's policy director, said: "If the Post Office loses this contract the network will lose significant footfall. It would be devastating to the Post Office network and we would undoubtedly see more closures than the current batch."

The anger among Remploy workers has shaken and somewhat shamed the unions involved, who had pinned all their hopes on a government U-turn. Sharon Mackillop, who was on a demonstration outside York Minster, had worked in the city’s Remploy plant for 11 years. She said: "I feel let down - the government is treating us like dirt. We're like part of a family and we want to stay together. Instead, we have been betrayed."

This week five senior GMB union officials resigned from Labour over the “despicable betrayal” of disabled workers at Remploy factories. GMB national secretary Phil Davies, a member for 30 years, said the party’s treatment of Remploy workers was so unjust that he had no option but to resign. Their letter says: “We have been misled by the secretary of state, who made assurances at the 2007 Labour Party conference which he did not keep. I have been a national trade union officer for 20 years and have never seen workers treated in such a despicable way. Our members are being ignored and bullied into submission.”

It’s great that the five have resigned and it’s another sign that New Labour is beginning to fall apart. But what took them so long? Why did they perpetuate the illusion that Brown was for turning and lead their members up the garden path? New Labour has not “betrayed” anyone. Brown, like Blair before him, leads a party and a government that is committed to the profit-and-loss account approach to public services. This has driven their policies in the NHS and in government-controlled operations like the Post Office and Remploy. Union leaders seem to be the only people in Britain not to be aware of this.

Paul Feldman
AWTW communications officer