PAC reports on lessons of PFI
The Commons Public Accounts Committee has published a new report examining lessons from the private finance initiative (PFI) and other projects.
The PAC found that some of the Government’s case for using PFI has not been based on robust analysis, but on ‘ill-founded comparisons and invalid assumptions’. On individual projects, MPs say that the costs and benefits identified in business cases need to be revisited after contracts are signed and periodically thereafter, to inform future procurement decisions.
In particular, the Committee’s view is that the Government should revisit the tax assumptions it builds into the cost and benefit case for PFI. The Committee believes that taxpayers could get a much better deal from PFI and highlighted what they described as the ‘buoyant and profitable market in PFI deals’. They added that the taxpayer’s position was made worse by ‘poor transparency of investor and contract information alongside patchy public sector commercial skills’.
The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, said: “The UK has 700 PFI contracts, with a further 61 projects in procurement and many others where PFI is being considered as an option. But while PFI has delivered many new public buildings and services that might not otherwise have been built, it is far from clear that it has provided value for money. At present, PFI looks like a better deal for the private sector than for the taxpayer.
“Government has treated PFI as the ‘only game in town’, but the use of this form of financing has been based on inadequate comparisons with conventional procurement which have not been sufficiently challenged. In future, the use of PFI must be based on a rigorous and transparent comparison with alternative funding methods. 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.”
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