One issue where the unions may have been right all along is the thorny question of the public finance initiative – which they raised concerns about a decade ago. Unions including Unison and the GMB have been arguing for years that PFI is simply more expensive than conventionally-financed schemes. (They also have an often kneejerk hostility to private companies in the public sector per se).
The coalition signalled last year that it believed the system was “discredited” and “a ploy to keep expensive projects off the balance sheet”.
Since the May 2010 election, nevertheless, the government has signed 34 contracts with a capital value of £1.8bn ($2.9bn), according to the Treasury. A further £5bn worth of deals, including waste recycling plants and big hospitals in Liverpool, are in the pipeline. Plus Michael Gove recently announced £2bn of deals for up to 300 schools.
Today the Treasury select committee slates the “high cost of finance in PFI”, saying there is little evidence that this has been offset by operational efficiencies. The committee, chaired by Tory MP Andrew Tyrie, suggests that the £200bn of future payments for current projects should be brought on to the government’s books – to remove perverse incentives to use private financing in the future.
“Continuing to use an inefficient funding system such as PFI is likely in many cases to increase the overall burden on taxpayers for the provision of public sector capital projects,” the committee said.
My colleague Nick Timmins covers the report in today’s FT. And here is Nick’s magisterial feature on the issue from last week.
The CBI said that without PFI there would not have been “hundreds of much-needed hospitals, schools and homes” delivered on time and within budget; maybe – but at what cost?
Jim Pickard
Kiran Stacey