Philip Hammond claims he's brought an end to PFI. If only that were the truth

During his Budget speech yesterday, Philip Hammond confirmed that half of the UK's £600bn infrastructure "pipeline" would be financed by the private sector. So far, no surprise – but then came a statement that few were expecting.

"I remain committed to the use of public-private partnership where it delivers value for the taxpayer," he said, "but there is compelling evidence that the private finance initiative does neither ... I have never signed off a PFI contract as chancellor, and I can confirm today that I never will. I can announce that the government will abolish the use of PFI and PF2."

Why is Hammond, a pro-private sector Conservative, ending PFI now? There are three reasons.

First, more than 65 per cent of the British public think PFI is fraudulent and want it banned. Second, Carillion's collapse exposed that the PFI sector as a type of giant ponzi scheme. Finally, Labour had already previously committed to end PFI and nationalise the structures that control PFI assets; Hammond (and his city donors) wants to prevent his opponents from being able to achieve that.

The chancellor's announcement should be seen as a big victory for the Labour movement and campaign groups such as The People vs PFI, which have long pushed for an end to these fraudulent deals. But when it comes to calling an end to PFI, this all feels very familiar. No wonder; we have been here before.

In 2008, the Scottish National Party created the Scottish Futures Trust to replace PFI in Scotland. Its new version, known as the Non-Profit-Distributing model (or NPD) is PFI in all but name; it ranks as one of the most expensive and meaningless political rebranding operations in history.

Then, in 2012, after more than a decade of slating PFI from the opposition benches, George Osborne’s big reveal on infrastructure policy as chancellor was to simply rebrand PFI as "PF2" pledging the “taxpayer would no longer lose out”. Hammond’s announcement confirms that it has.

When political parties are beholden to the financial services sector – 50 per cent of Tory funding is dependent on the City – there is no turning back the clock to government funding the infrastructure we need, even if the National Audit Office has found that the interest rates on government finance are around half the rates agreed on PFI finance schemes.

So despite Hammond’s announcement, the logical conclusion is that PFI is not dead. Not by a longshot. Not while the dead hand of HM Treasury, the neoliberal enforcement agency of the UK government, remains committed to imposing policies that are in the interests only of the financial sector, regardless of the impacts on our society.

As Hammond himself has stated, he remains committed to public private partnerships (PPPs): an expensive, disastrous infrastructure financing model of which PFI is simply one particularly expensive and disastrous iteration. PFI and PPP will continue as long as the myth that the nation's finances are akin to a household budget, that public sector capital is limited, and that public, not private debt, is the problem are perpetuated. These myths, which restrict governments from enacting socialist policies, are enshrined in the EU’s Maastrict Treaty which sets government debt to GDP limits while ignoring private debt levels. This, in part, is what caused the 2008 crash.

But if PFI is still with us, and these myths continue, then what is behind Hammond's unexpected statement?

Even more than Brexit, the biggest fear of the City of London is that a Labour Government that will introduce progressive legislation to limit its power, forcing finance to serve society and not itself. Labour has committed to nationalising PFI; that means banks, equity investors and other private financiers being forced to take a haircut on their investments when a future Labour government nationalises public infrastructure assets at less than market value.

For a speculator, the best way to avoid nationalisation is to have government buy up all the outstanding PFI contracts, pay you out in full for all the extortionate inflation linked interest payments you were due to receive over the next 20 years, and then for government to refinance the remaining £200bn= debt burden at lower rates of interest using the Bank of England. The proposal to centralise part of this high cost of NHS and local government PFI debt, without seizing public control of PFI infrastructure assets (via SPV nationalisation), is also suggested by the CHPI think tank.

As Greece found out the hard way in 2010, once existing bank debts are centralised and converted into government debts or debts to foreign institutions like the IMF or ECB, it becomes nigh on impossible to challenge the debts in court or to default on them. Labour wants to nationalise existing PFI assets because even the bankers involved concede the PFI model is a "fraud on the people", and the agents pushing it were never serving the public interest.

The Treasury has a duty to ensure that any public spending delivers best value for the public purse. PFI is an abuse of this duty: it is simply about issuing more private debt and creating an export-oriented role for the City of London financing infrastructure globally. Until we see wholesale reform of the Treasury’s mandate, so financial policy serves people and planet and not its own interests, we will not see an end to the government foisting PFI and PPP deals on the UK, to say nothing of its ongoing role in pushing PPPs on the rest of the world.