Time to get our PFI tax back

By Stella Creasy MP (Labour and Co-operative, Walthamstow)

Much has been written about how to reform PFI and its costs, but little about the benefits – in theory one of them is that funding private sector companies to run public sector projects will generate tax receipts as a by product. However, a new report from the Public Accounts Committee published today shows again when it comes to tax this government is all avoidance and no action.

Tax-haven The report highlights how tax revenue is being lost as PFI contractors move assets offshore to havens such as Guernsey or Jersey. The Treasury admits it has no idea if these companies pay corporation tax or any taxes liable on the profits or equity gains these lucrative contracts generate.

This isn’t just a problem for the taxman but goes to the heart of whether a PFI deal can be considered value for money. The projected receipts generated from working with private companies are integral to deciding the advantage of PFI as a means to procure goods like schools or new roads, rather than directly paying through the public purse.

Yet if the sums involved in making this choice aren’t accurate because the Exchequer doesn’t then get that tax back, the decision to use PFI itself could be equally defective.

Treasury guidance (pdf) on managing public money allows for the “tax planning” of bidders to run these contracts to be taken into consideration and indeed in 2003 the previous government issued a directive on discouraging tax avoidance through procurement. However, there’s little evidence this is being used to prevent this behaviour by these firms.

If this government is serious about securing a good deal for the UK taxpayer they have two choices.

They could rewrite The Green Book rules governing how the value for money of PFI deals is assessed so that this faulty maths isn’t part of the procurement process. Alternatively, they could act to strengthen the guidelines and how “tax planning” is determined so that these calculations of value for money in principle become fact.

Either option could improve both Treasury procurement practice and accountability in spending public money – yet instead the government has already admitted it has no plans to do anything about the problems with how the Green Book deals with tax in PFI deals.

Of greater concern, it is pressing ahead with using this misleading way of calculating the value for money of the new PFI projects it is currently negotiating that are worth £7bn. Given one company running more than 33 PFI schemes made more than £38m in profit alone last year but paid just £100,000 in UK tax, the potential sums of lost tax revenue could be vast.

That the Treasury doesn’t even know how much money they’re due shows their complacency, and the complexity in holding them to account for the money we’re losing. Yet failure to try to act on this is not an option in times of austerity – it’s time we told them we want our PFI tax back.

Think the government should get its sums right? Email your MP today and ask them to write to the Treasury to change their minds and act on PFI tax avoidance.

http://twitter.com/labour52rose/status/109215670956335104 Alex Braithwaite

RT @leftfootfwd: Time to get our PFI tax back http://t.co/aMTIRp4
http://twitter.com/bristolnuj/status/109215820458102784 Bristol NUJ

Time to get our PFI tax back: http://t.co/OqjnqRi says @StellaCreasy
http://twitter.com/stellacreasy/status/109216224575111169 stellacreasy

RT @leftfootfwd: Time to get our PFI tax back: http://t.co/GUHtrWd says @StellaCreasy < join the #PFiddle campaign
http://twitter.com/cadrieu/status/109217606837342208 Steve

RT @leftfootfwd: Time to get our PFI tax back: http://t.co/GUHtrWd says @StellaCreasy < join the #PFiddle campaign
http://twitter.com/stellacreasy/status/109219128098824192 stellacreasy

@tomblenkinsop the #PfIddle campaign is now up and running ……..http://t.co/cGFo8kV
http://twitter.com/shamikdas/status/109219134390272000 Shamik Das

Gd stuff frm Stella: RT @leftfootfwd: Time to get our PFI tax back: http://t.co/h49TjCY says @StellaCreasy < join the #PFiddle campaign
http://twitter.com/stellacreasy/status/109219604085219328 stellacreasy

hey @jessenorman hope you'll be joining us in the #PFiddle campaign ? details here http://t.co/cGFo8kV do let me know if you'll help?
http://twitter.com/politicalplanet/status/109220405293748224 Political Planet

Time to get our PFI tax back: Email your MP today and ask them to write to the Treasury to change their minds an… http://t.co/8i7u0GY
http://twitter.com/shrewsburysi/status/109220642209021952 ShrewsburySi

RT @leftfootfwd: Time to get our PFI tax back http://t.co/pYIIwy0
http://twitter.com/stellacreasy/status/109223045780078592 stellacreasy

hey @Jesse_Norman hope you'll be joining us in the #PFiddle campaign ? details here http://t.co/cGFo8kV do let me know if you'll help?
http://twitter.com/therightarticle/status/109225630331187200 Michael

Time to get our PFI tax back l Left Foot Forward – http://j.mp/oy2a5b – Good piece from @stellacreasy
http://twitter.com/samsoprano30/status/109225859906416641 Sam hussain

Time to get our PFI tax back l Left Foot Forward – http://j.mp/oy2a5b – Good piece from @stellacreasy
http://twitter.com/superfurryandy/status/109227163479314432 Andy Bean

RT @leftfootfwd: Time to get our PFI tax back http://t.co/MrIZNP0 #ukuncut
http://www.workingforwalthamstow.org.uk/?p=760 Getting the Sums Right: Join The PFI Tax Back Campaign | Working for Walthamstow

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http://www.workingforwalthamstow.org.uk/?p=770 Getting the Sums Right: Why I’m Campaigning To Get Our PFI Tax Back | Working for Walthamstow

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Selohesra

Although they started under John Major it was the last Labour government that really abused them allowing Brown to spend recklessly whilst still pretending to be Mr Prudent. Most of this is a problem of New Labours making
Robert

Well yes to some degree I can accept that, on the other hand the school building program has made a massive difference, so did the hospital building program sadly the cost of the private funding was to much, massive in fact, I suspect it was down more as a political matter then anything else.
http://twitter.com/tomblenkinsop/status/109265447291068416 Tom Blenkinsop

@tomblenkinsop the #PfIddle campaign is now up and running ……..http://t.co/cGFo8kV
http://www.stephenwigmore.blogspot.com Stephen W

You’re right. The last Labour government was grossly incompetent almost to the point of being down-right criminal, allowing Billions and Billions of pounds of public money to be siphoned off to big business, and standing idly by while they avoided the tax on these massive gains.

The Labour Party is truly corrupt and incompetent up to its eyeballs. Thank you for pointing this all out to us. I presume you will be defecting from Labour to some party that isn’t grossly corrupt and in hock to big business immediately?
http://twitter.com/pidster/status/109360362264072192 Pïd stèr

RT @leftfootfwd: Time to get our PFI tax back: http://t.co/GUHtrWd says @StellaCreasy < join the #PFiddle campaign
Ally

Stella is just pointing out what needs to be done. She was not in parliament when this was first proposed. The public private partnership was mooted by Lord Prescott. I knew it would be a disaster for the tax payer as it like getting money from a loan shark. Sounds a good proposition until you find out the small print. This is what we are discovering just now.
Also given that this was a tory policy borrowed by the blairites its hard to see how anyone can blame labour. It was new labour the Frankenstein creation of Mandy and Butcher Blair that pushed all these things through.

It does have to be pointed out that if fatcher and co had not criminally under resourced the public sector and sold everything off to big business Labour or even new labour would bot have been put in this position.

I agree its time for the government to start governing and to get our taxes back from the rich instead of deriding the poor all the time.
Tax Adviser

For your info:

All pfi companies based in the UK are taxable in the same way any other company. So HMRC receives tax on profits made by PFI companies.

Shareholders in PFI companies are different. Tax concessions are made to them for all different commercial and social reasons. UK pension funds are do not pay tax and are big holders of pfi investments. Offshore investors also receive concessions but these need to be set off against UK plc trying to attract international investors and the quid pro quo for UK investors investing elsewhere in the world. UK insurance companies pay tax on their investment returns etc.

Sorry – but you should really spend an hour or two with a tax partner of an accounting firm so that your trajectory becomes credible to those that matter!!
http://twitter.com/digitallaw/status/109571199062904833 A New Voice

Time to get our PFI tax back: Any offers to help compile an on-line database of such abuses (I can host) http://t.co/tPPTRbZ
http://www.therewesaidit.com Jonathan da Silva

PFI it’s value for money only if you make ludicrous assumptions! Thanks Stella, shame no one from Labour stood up a few years ago.

A trillion in extra debt (not counting PFI liabilities) from circa 2001 for temporary and unsustainable improvements in health and education (if one ignores the preventable deaths from the Foundation restructuring and MRSA/C-DIFF). Bow waves of debt from moronic military spending as our troops want for effective equipment. Can you exaggerate contempt for people and venality of the Brown/Balls/Ed Miliband core’s behaviour at the exchequer?

Of course one has to accept Mr Brown’s view we could not borrow directly except of course to pay handouts to banks so the Govt’s friends could maintain their affluent lifestyle at the expense of taxpayers and savers.

Sadly this seems clearly a corrupt practise to make friends of the then ‘Govt’ rich[er]. Off balance sheet stuff that Mr Brown so criticised Enron for. No wonder ex Labour ministers are doing very well at Davos, Bilderberg, torturers’ conventions and banking communities paying to hear their speeches in empty halls everywhere.

Is there any guarantee the one assumes next Labour Govt will not be corrupt led by 2 acolytes of Brown?
http://twitter.com/londoniww/status/109604401299197953 London IWW

#Capitalism: Time to get our PFI tax back http://t.co/IJKhzQ6 | #TaxAvoidance #Corporatocracy
http://twitter.com/stellacreasy/status/109628836181835776 stellacreasy

@Coggmeister you should read my article before you send such tweets- they did issue procurement guidance in 2003….http://t.co/cGFo8kV
http://www.workingforwalthamstow.org.uk Stella Creasy

Hi “tax adviser”- the issue here is about the presumption of tax revenue generated that then informs the value for money assessment made in choosing to use PFI rather than any other form of procurement model. You may like to check out the worked example in the Treasury Select Committee report pg 31 which higlights the presumption on tax revenue generated that is used in that calculation is made on receipts of corporation tax. As it states “this adjustment suggests that approximately a quarter of all revenues paid to the PFI provider will be profits subject to corporation tax at the full rate”. The point I’m highlighting is that if that assumption isn’t correct then neither is the VFM assessment. You may also then like to check out the evidence on the numbers of PFI contractors who are based in the UK….
http://www.leftfootforward.org/2012/02/public-sector-outsourcing-is-a-mess-and-its-the-taxpayer-picking-up-the-tab/ Public sector outsourcing is a mess – and it’s the taxpayer picking up the tab | Left Foot Forward

[...] ongoing scandal, being investigated by Stella Creasy MP, of companies who bid for PFI contracts as part of a process that assumes they will pay taxes [...]