In your editorial (26 September) on John McDonnell’s proposal that PFI contracts be bought back by a future Labour government you suggest that any such action might be constrained by the need to persuade the financial markets to continue to lend the government money. This was an error on your part: this constraint does not exist.

Firstly that is because no government has to borrow. Quantitative easing proved that. In the UK the government (via the Bank of England) has done £435bn of QE, with the result that the government owns nearly a quarter of its own debt now, effectively cancelling it and all the interest payments due on it in the process. What this means is that another £58bn of QE could be used to cover capital costs of PFI without any difficulty. The remaining cost of buying out the service element may be little more and since QE debt carries no interest cost, there may be precisely no cost at all to buying these PFI contracts back into government control as a result. This was precisely the basis of People’s QE, which I created in 2010 and which was one of the platforms on which Jeremy Corbyn was elected Labour leader two years ago. In that case the idea that we are beholden to the bond market “confidence fairy” (as Paul Krugman so aptly named it) when proposing such a move is just nonsense. The fact is that if bond markets are truculent any government can just work around them.

Second, your editorial also ignores the fact that there is enormous demand for government debt from the growing number of relatively (and I stress relatively) wealthy retirees needing a secure home for their money. The enormous cash piles of multinational corporations only adds to this demand. That demand proves that in fact those buying government debt are not doing the government a favour: it is instead doing them a favour by providing them with the secure savings opportunity that they crave.

People’s QE was one of the core pillars of Corbynomics and can deliver the end goal of cancelling PFI. It is time for it to re-emerge centre stage and see off once and for all the interminable questions of how PFI repurchasing and other infrastructure investment will be paid for.

Professor Richard Murphy

Professor of practice in international political economy, Department of International Politics, School of Social Sciences, City, University of London

• The debate on PFI contracts (Nils Pratley and Editorial, 26 September) should recognise that they are the product of an essentially dishonest system.

Example: in 2002 City of York council made a PFI bid (there was no alternative) for funding to rebuild three primary schools. To do so it had to “prove” that private finance would be cheaper than public – unlikely, since governments borrow more cheaply, and don’t have to make a profit.

PFI cost was estimated at £11.1m, against an initially cheaper public sector comparator (PSC) of £10.3m. So, to meet the rules, the PSC figure was increased by £1.4m for “risk transferred” to the private provider. The bid was accepted, the schools were built.

But no risk is transferred unless specified in the contract. This could not be tested as the full business case was not made public.

In this way PFI bids have involuntarily provided untestable “evidence” that private finance is cheaper than public.

Should PFI companies be fully compensated for arguably uneconomic contracts secured under a system dishonestly rigged by government in their favour?

John Heawood

Fulford, York

• The Labour party should give short shrift to bleating from business interests about its promised shake-up for private finance initiatives (Pledge to take PFI projects back into state control alarms business leaders, 26 September). Albeit launched by John Major, PFI took off in the Blair-Brown era, and had a noble aim – to rebuild crumbling Victorian infrastructure, especially schools and hospitals, without boosting government borrowing. That would have scared the financial markets, which traditionally get jittery whenever Labour administrations try to tackle this country’s long-neglected problems. But underlying the push for PFI was something ignoble and worrying – a deplorably craven attitude to business and an insouciance towards PFI providers getting their snouts deeply into the trough.

Quality investigative journalism in the Guardian and elsewhere – notably Private Eye – has shown how appallingly one-sided some of these deals are, saddling school and hospital authorities with long-term debts that they can ill afford and yet were harried by Gordon Brown’s Treasury to take on. The very worst of these projects should be taken over by the state without compensation and PFI consigned to the dustbin of history where it belongs.

Andrew Baxter

Brighton

• There’s a simple way to ensure that PFI holders play nice when their contracts are bought out by John McDonnell. Just remind them who controls the tender list for future business. There, I knew 20 years in procurement wasn’t entirely wasted.

Tim Grollman

London

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