£55.5m ‘wasted’ on empty school under PFI deal

MPs criticise ‘institutionalised fuzzy thinking’ and call for the evidence on private finance initiatives
20th June 2018, 9:48am

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£55.5m ‘wasted’ on empty school under PFI deal

https://www.tes.com/magazine/archive/ps555m-wasted-empty-school-under-pfi-deal
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MPs have hit out at wasteful PFI projects such as a school in Liverpool that has lain empty since 2014, but is still being paid for.

The city council is paying £4 million a year under a “flawed” deal for the building and had spent £55.5 million on it since it was last used, according to a public accounts committee report published today.

A report said PFI (private finance initiative) contracts were “not working for the taxpayer” and the government should release evidence to back up its continued claims that they provide value for money.

Schools and hospitals are among the 700 plus ongoing PFI contracts, which have been used to build £60 billion of “assets”, the report found.

But the Treasury has “no plans to assess the value for money” of PFI to the public purse, despite 25 years of programmes that have poured tens of billions of pounds into private firms, the committee said.

The damning report said Chancellor Philip Hammond’s department had made a “disappointing” lack of progress in analysing the value of PFI deals since it raised concerns in 2011.

And it called for the Treasury to release this data by April next year and compare the cost with similar public-sector contracts.

A National Audit Office (NAO) report in January found that schools can cost 40 per cent more to build and maintain under PFI than if the government simply borrowed the money

The NAO report also revealed that taxpayers face paying almost £200 billion for PFI contracts between now and 2040, even if no further deals are made.

The public sector has been using PFI less and less, falling from a peak of over 60 projects in 2007-08 to no new contracts in the past two years, today’s report said, pointing out that a reformed set-up, private financing 2 (PF2), has only been used six times since it was initiated in 2012.

These six projects include the £623 million Priority School Building Programme, under which 46 schools will be built in five batches.

The report said that the Department for Education was already collecting data, as part of the Priority School Building Programme, comparing the value for money of privately financed schools on PF2 contracts against public financed ones - the review is expected to be completed in summer 2018.

Meg Hillier, chair of the Public Accounts Committee, said: “Much has changed in the past quarter-century, but Government’s inability to answer basic questions about PFI remains undimmed.

“It beggars belief that such apparently institutionalised fuzzy thinking over such large sums of public money should have prevailed for so long.

“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.”

Blairite legacy of PFI

PFI was introduced by the John Major government in 1993, but underwent significant expansion when Tony Blair’s Labour government swept to power in 1997. It allows large infrastructure projects to be kept off the public balance sheet.

The report said that PFI frontline costs had been high and the contracts too inflexible.

A Tes investigation last year found that that one school was paying more than £2,000 for an external tap under a PFI contract.

The Public Accounts Committee said the Treasury had told it that collecting data was the responsibility of individual departments, adding: “Without quantifying the benefits it is impossible to know whether PFI offers value for money, yet the Treasury continues to assert that it does.”

A Treasury spokesman said: “We have significantly increased public investment in vital projects like roads, schools and hospitals while continuing to use private finance where it offers value for money.

“We made changes to PFI in 2012 to improve it and always compare the cost of using public or private finance to ensure value to the taxpayer for these projects.

“Since 2010 only 80 such contracts have been signed, compared to 620 signed between 1997 and 2010.”

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