A report from the public accounts committee (PAC) said the initial gain from PFI has been to the Treasury as the expenditure has been kept off the books. However, the ongoing costs to the institutions at the front line have been high and the contracts inflexible, and the subject of much public debate.

PAC is highly critical of the Treasury’s continued inability to provide data on benefits which would show whether the PFI model provides value for money, despite telling the previous committee in 2011 that it would introduce benefits realisation assessment into its value for money guidance, for PFI projects that are underway.

When asked whether the benefits have justified the higher financing costs, the Treasury acknowledged that it is ‘an impossible question answer’ because it does not have the facts needed. The department told the committee that it considers collecting data on the benefits of PFI to be the responsibility of individual departments. MPs were told the Infrastructure and Projects Authority (IPA) has recruited a single member of staff to look across the entire stock of some 700 PFI and PF2 projects and see what data exists, but pointed that this exercise will only collate rather than create data, and it is unclear how the Treasury and IPA will use the results.

The committee found little evidence of a strategy for working with local public sector bodies to co-ordinate sharing of best practice about managing existing PFI deals, pointing to a situation where Liverpool City Council is paying £4m a year for an empty school, under a ‘flawed deal’ will see almost £55.5m of taxpayer funds spent since the school became empty in 2014. 

Offshore funds have bought up about half of the equity in PFI and PF2 projects so that the projects’ owners are increasingly remote from the public service being delivered. In addition, offshore owners of these projects pay little tax, thereby reducing one of the benefits used to justify the contracts in the first place, PAC argued. Evidence to the inquiry stated that the five largest of these offshore funds paying less than 1% in tax on their PFI profits.

The report also claims that the Treasury’s ‘obvious desire’ to keep PF2 projects excluded from government debt statistics has created risks to value for money for the taxpayer, since the Treasury  has significantly reduced the amount the public sector will receive if savings are made as a result, which it accepts will negatively impact the value for money of PF2.

PAC notes there are only a handful of PF2 projects in the pipeline – the IPA has identified a need for the UK to spend £300bn on infrastructure by 2020/21, yet PF2 is only being proposed for two projects which require total public and private investment of up to £7.8bn.  This suggests that the government has lost faith in its own usage of PFI, and the committee says if this is the case the government should provide a clear explanation of its position.

Meg Hillier, PAC chair, said: ‘The Treasury simply cannot support its assertion that PFI represents good value for money. Yet while government is now seeking to collate the PFI data that does exist, it does not intend to publish the results of this work.

‘This is unacceptable. Government must level with taxpayers about the value of PFI.

‘The Treasury and Infrastructure and Projects Authority must also be far clearer about how it expects public bodies—many of whom are already locked into costly and inflexible PFI projects—to use PF2.

‘It is critical that taxpayers are not further lumbered with excessive costs arising from poor contracting.’

Public Account Committee’s Private Finance Initiatives report is here: https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/894/894...

Report by Pat Sweet