MPs turn on PFI

There is nothing like being wise after the event. The Public Accounts Committee has
turned on the private finance initiative, saying there is ‘no clear evidence’ that PFI delivers more value for money and no evidence that taxpayers have shared the profits. The committee reported:

‘There were instances where PFI may have been used where there was no evidence that it was the best procurement route. Local authorities and health trusts used PFI because there was no
realistic alternative, not because it represented best value for money.

The use of PFI and its alternatives should now be robustly evaluated. Looking back at PFI procurements, the government should also do more to find out where and why PFI works best and capture the lessons. Departments should also do more to ensure they get the best out of existing PFI contracts.’

That resounding critique chimes with independent findings. On the basis of freedom of information requests, the Scotland Herald “http://www.heraldscotland.com/the-scandal-of-pfi-invest-just-pound-100-and-make-pound-89m-profit-from-the-taxpayer-1.828736”>foundthat ‘equity of just £100 invested in rebuilding
Hairmyres Hospital in East Kilbride is predicted to earn £89 million in dividends over 30 years. And £500,000 of equity in the new Edinburgh Royal Infirmary is expected to earn £168m in dividends.’ Most of these projects were funded by cheap credit and the “http://www.dailymail.co.uk/news/article-1341764/How-Labour-left-taxpayer-245bn-Debt-new-schools-hospitals-soars-fivefold.html”>Mail is one of many newspapers to have been appalled by the explosion of PFI debt, now standing at £240bn by some estimates.

Such colossal waste is born of lax contracts that were overtly favourable to the contractors. The Public Accounts Committee levelled condemnation at the Department for Communities and Local Government and the Department of Health for failing to secure equitable deals for the taxpayer. Housing contracts merit particular opprobrium – often running miles over budget, always completed
late and frequently the subject of protracted legal proceedings. Salivating construction barristers tell me that the Olympic village will prove to be a similar monument to waste.

This story is attended by a rich and black irony. Chairman of the committee, Margaret Hodge, is a former minister, responsible for a measure of the general incompetence. She is, of course, oblivious; the irony obscured by her august pronouncements.