More savings from PFI possible
By politics.co.uk staff
Departments are ignoring major potential for significant savings from PFI projects, MPs have found.
The Commons’ influential public accounts committee (PAC) said the government was not taking advantage of the efficiency gains and economies of scale achieved in the private sector.
Failing to secure financial advantages of the taxpayer only undermined the decision to press ahead with private finance initiatives (PFI), the report found.
MPs concluded there was no clear evidence that contracting out the delivery of new homes and hospitals to the private sector was any better value for money than other routes.
“By bundling together large numbers of PFI projects, private sector investors may use the consequent economies of scale to drive up the value of their interests and generate bigger profits,” committee chair Margaret Hodge said.
“We are concerned that the benefits arising from these economies of scale are not being shared by the taxpayer.
“At a time when public finances are so tight, government must use the weight of its buying power to negotiate with major PFI investors and contractors a better deal for the taxpayer.”
The PAC’s conclusions came after it assessed the Department for Health and Department for Communities and Local Government’s hospital and housing portfolios.
Over 13,000 homes had been built and 76 hospitals were operational which had been financed by PFI by April 2009.
Many PFI projects have taken much longer and cost much more than initially planned, the report found.
These problems were not as apparent when it came to hospitals, but MPs noted wide discrepancies in the cost of hospital support services, including cleaning, catering and portering.
The CBI’s head of public services reform Elizabeth Fells jumped to defend PFI, however, arguing that the majority of projects had been delivered on time and on budget.
“Any moves to challenge existing contracts will undermine private sector confidence, jeopardising future investment in crucial infrastructure projects,” she warned.
