One of neoliberalism’s promises was that it would free us from bureaucracy. By rolling back the state, it would vanquish the stifling power of officialdom, granting us unprecedented freedom and opportunity. This promise runs through the works of Friedrich Hayek and Milton Friedman, and Ludwig von Mises’ book Bureaucracy.

But in place of the old bureaucracy, it has created a state-corporate system more oppressive and intrusive than anything governments produced in the social democratic era. The hybrid nature of this system, protected from challenge by commercial confidentiality, property rights and civil law, places it beyond the reach of democracy.

The intermingling of state and corporate power allows corporations to harness the resources and protection of the state, and the state to hide behind its corporate partners. A classic example is the private finance initiative: a programme developed in the UK by the Conservatives but greatly expanded by Tony Blair and Gordon Brown. Under PFI, private companies finance and deliver public goods that governments would otherwise have provided.

We were told it would produce better services at lower cost, but the contracts have repeatedly put corporate demands ahead of public need. The debts afflicting hospitals and other parts of the public sector, as they are forced to keep paying for services they neither want nor need, were both foreseeable and foreseen.

Labour has now promised, if it takes office, to review all PFI contracts and buy them out if necessary. But the message has yet to filter through, even to some Labour councils.

A few days ago, in Sheffield with local campaigners, I toured the battle lines between people and profit. Sheffield has been described as Europe’s greenest city, but the council seems determined to change this through the massacre of many of its famous avenues of trees. In 2012, it signed a contract for what it called “the largest highways PFI programme in the UK” with Amey, a subsidiary of the vast Spanish company Ferrovial.

As part of this programme, Amey earmarked 6,000 trees for felling. Among them were magnificent and stunning specimens, treasured by local people, including famous landmarks such as the Vernon Oak in Dore, the Chelsea Road elm, the Western Road memorial trees and the cherry avenues of Abbeydale Park Rise.

The reasons given for destroying them seemed incomprehensible: the lifting of a kerbstone or two, the cracking of a pavement, roots intruding a couple of inches into the road. These are routine issues in any city, which can be easily and cheaply addressed without any need to attack the tree. In the case of the Chelsea Road elm – a rare survivor of Dutch elm disease, harbouring a colony of even rarer white-letter hairstreak butterflies – the residents commissioned an engineer to provide an estimate for addressing the cracked paving, and discovered it could be done, at minimal cost, without felling the tree.

But, the council tells me, “alternative engineering solutions … are not funded within the contract”. So they cannot be applied, regardless of any cost savings, and regardless of common sense. The terms of the contract were locked in for 25 years in 2012, and cannot be changed. It specifies that the trees must be felled, so down they must come.

Nor can there be meaningful engagement with local people – that, too, would stand outside the terms of the contract. The council has claimed that the issue is too big and too contentious for a public consultation to handle. In a democratic system, big and contentious are generally considered to be reasons for consultation.

The 150 year old Vernon Oak in Dore, one of thousands of Sheffield’s street trees earmarked to be felled. Photograph: Christopher Thomond/The Guardian

Because a PFI contract must guarantee financial certainty for the corporate partner, it forbids government agencies to learn, adapt and respond. As a result, the landscape architect Steve Frazer points out, Sheffield’s streets, with their rich communities, complex forms and multiple functions, are being reduced to nothing but “conduits for conveying cars and people”. Sterilised, featureless streets are the physical embodiment of a rigid and intolerant mindset, which itself arises from a rigid and unassailable contract. The flexibility that capital demands of the workforce cannot be applied to capital.

If the contract were changed, the council insists, there would be “catastrophic financial consequences”. Exactly what these are is impossible to know, because the relevant sections of the contract have been blacked out. This, the council tells me, is because such details are “commercially confidential or commercially sensitive to either Amey or the council.”

It is hard to see why. It seems to me that the information is more likely to be politically embarrassing than commercially compromising. In a twist that comes straight out of a Franz Kafka novel, the schedule to the contract (#30) that explains why parts of it have been deemed “commercially sensitive” has been withheld from public view. The hybrid nature of PFI provides a never-ending excuse for denying information to the public.

As soon as a PFI contract is signed, the public sector must become the guardian of private sector interests. On Friday two local people, Calvin Payne and the Green councillor Alison Teal, will be tried under another hybrid instrument: a civil case with potential criminal penalties. Sheffield city council has accused them of contempt of court, by breaking the injunction it served to prevent them from obstructing the felling of the trees they love. It has asked for custodial sentences. They might also, if found guilty, be charged with the costs of delaying the contract, which could amount to hundreds of thousands of pounds and result in the seizure of their assets.

Throughout the neoliberal era, governments and companies have devised new criminal and civil procedures to defend capital from protest. This is the force behind market forces. The enabling state, with its strong public services and robust social safety nets, might have been rolled back, but the security state has expanded, to protect corporate profits from democracy.

Those who defend the neoliberal model insist that such arrangements are a distortion of the programme, caused by government meddling, thwarting their purely commercial utopia. But the truth is that this hybrid, Kafkaesque system is an inevitable result of a model that cannot meet our needs – while providing endless opportunities for clientelism and capture. PFI exemplifies the practice of neoliberalism. It exposes the doctrine for what it is: a gigantic self-serving con.

• George Monbiot is a Guardian columnist