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How the public sector comparator lines up

Neil Munro reports on the verdict of Audit Scotland's review into the use of private cash to fund schools

THE most fundamental challenge to PFI is the finding that the key test of whether it would be cheaper than the notional publicly funded alternative (the "public sector comparator" or PSC, which has to be applied to all potential PFI schemes) is seriously flawed.

While Audit Scotland said that the comparator is prepared with care, there is "inherent uncertainty and subjectivity".

The comparison does not take account of the higher cost of private finance compared with public sector borrowing, which is typically between 2.5 per cent and 4 per cent below actual PFI costs in individual school projects.

Audit Scotland's investigations found that the main costs of PFI "are not significantly different from or are higher" than the costs under the public sector comparator. This flies in the face of the analysis carried out by consultants for each of the school projects which, so far, have always gone in favour of PFI as the cheaper option. But the audit review said their reasoning was not made clear.

The report found that any cost advantage was narrow in the six projects it investigated in detail. Glasgow's renewal programme was said to cost pound;434 million against pound;460 million using the public sector comparator, for example. Other illustrations were:

* pound;122 million for Edinburgh's PFI programme compared with pound;124 million under the PSC.

* pound;105 million in Falkirk against pound;115 million.

* pound;53 million in West Lothian against pound;55 million.

* pound;32 million in Highland using both options.

* pound;23 million for Balfron High compared with pound;25 million.

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