PFI, tax havens, and what happens next

We all knew there was a trade off with the PFI (Private Finance Initiative) bonanza – lots of new schools and hospitals appeared – based on the boom-time principle, buy now, pay later.

But were we warned that PFI did not just involve allowing private finance to be paid rent on the family silver, but would also involve taxpayers effectively exporting their hard-earned taxes into tax havens from which UK tax-payers would derive no benefit at all?

Every time I have ever blogged about tax havens, I have been notified by the authorities in the Channel Islands that they are all completely above board and hide nothing from anybody.

The problem, as disclosed in today’s FT, is that many of the major financial institutions that continue to make money from PFI have parked their proceeds where else but in Jersey and Guernsey. The matter surfaced at the Commons Public Accounts Committee last week where Treasury officials were asked whether it was true that HSBC Infrastructure had moved some 33 such PFI entities offshore to the Channel Islands.

These projects had generated £38 million in profit in the past tax year – for which it was alleged a mere £100,000 in tax had been paid. The Treasury officials did not deny that this was the case. Who drafted these contracts? How on earth was a PFI contract put together that allowed the financing company to cart the entire business offshore?

I don’t know much about Parliamentary drafting, but surely there might have been some vigilance to ensure that any such thing with the regard to PFI was quite simply illegal. There are more than 50 PFI projects still in the pipeline waiting to be signed off. Might it be a good idea to slam the stable door whilst at least the rear back foot of the PFI horse has not quite yet bolted?