PFI projects have resulted in construction of many schools and hospitals - but at a cost

PFI treated as only ‘game in town’ by govt

PFI treated as only ‘game in town’ by govt

By Phil Scullion

Private finance initiatives (PFI) have been treated as the "only game in town" by government for too long, according to a committee of MPs.

The public accounts committee urged the government to employ a more "rigorous" and "transparent" comparison process between PFI and alternative funding methods.

Margaret Hodge, committee chair, acknowledged that PFI has delivered many new public buildings and services, but questioned whether it had provided value for money.

She said: "At present, PFI looks like a better deal for the private sector than for the taxpayer."

"We have seen information which strongly suggests that investors are making excessive profits from selling on shares in PFI projects. However, the government currently lacks sufficient information on the returns made by investors, who have been able to hide behind commercial confidentiality.

"The government should extend freedom of information to private companies providing public services and should introduce arrangements for sharing equity gains."

The Treasury recently announced that it plans to make savings of £1.5 billion across the operational PFI projects in England.

Ms Hodge welcomed the news but warned: "We will want to see clear evidence that real savings have been made, and that they have not been made simply through service cuts and at the expense of service quality."

Currently the UK has 700 PFI contracts in operation to deliver a wide range of public assets and services.

A further 61 contracts are under consideration by the government.

Two weeks ago the Commons' Treasury committee recommended that PFI be placed on departmental budgets to prevent ministers from agreeing deals which forced the next generation of taxpayers to shoulder the bill.

"We can't carry on as we are, expecting the next generation of taxpayers to pick up the tab," Treasury committee chair Andrew Tyrie said.

"PFI should only be used where we can show clear benefits for the taxpayer. We must first acknowledge we've got a problem. This will be tough in the short term but it should benefit the economy and public finances in the longer term."

However the CBI, Britain's main pro-business organisation, pointed out that without PFI Britain would not have seen hundreds of hospitals, schools and homes built on time and within budget.

"The committee's report is right to say lessons from the past need to be heeded, and PFI must only be used when it is appropriate and offers the best value for money," deputy director-general Neil Bentley said.

"But with the state of the public finances, it is absolutely essential we attract the billions of pounds of private finance needed to upgrade our national infrastructure and boost jobs and growth.

"To do this, investors need confidence, and the government must decide sooner rather than later how PFI will evolve, alongside a range of alternatives, such as tax increment funding and pension fund financing."