Government must count £35bn in PFI debt
The Treasury Select Committee has recommended that the liabilities of the controversial infrastructure projects to be "brought on balance sheet" in order to stop them being used to "circumvent departmental budget limits".
In a hard-hitting report, the Committee found that, despite being an "extremely inefficient" way of financing projects, there were "significant incentives to use PFI which are unrelated to value for money".
The MPs said "PFI allows Government departments and public bodies to make big capital investments without committing large sums up front".
Andrew Tyrie, chairman of the TSC, said: "PFI means getting something now and paying later. Any Whitehall department could be excused for becoming addicted to that."
He also called for an immediate overhaul of PFIs as a form of procurement. "These incentives unrelated to value for money need to be removed. Stricter rules and guidelines governing the use of PFI must be introduced," the Committee said.
The MPs found that the cost of capital for a typical PFI project is over 8pc – double the long-term government gilt rate of approximately 4pc.
An estimated £60bn of capital investment is already committed by private investors in PFI projects, including the building of schools, hospitals and other infrastructure projects.
When the Committee launched its investigation into PFI in March 2011, 61 new projects were being procured with an estimated investment value of £7bn.
The majority of PFI debt does not appear in official debt data. The Office of Budget Responsibility (OBR) has estimated if it were, Britain's national debt would increase by £35bn or 2.5pc of GDP.
Despite the "significantly higher cost of finance", the Committee said it had not found "evidence of savings and benefits in other areas of PFI projects".
Instead, they found that the "design innovation was worse in PFI projects and we have seen reports which found out that building quality was of a lower standard in PFI buildings."
The report added: "PFI is also inherently inflexible, especially for NHS projects.
"For too long PFI has been the 'only game in town' in some sectors which have not been provided with adequate capital budgets for their investment needs. This problem is likely to get worse in the future with capital budgets cut significantly at the Spending Review."
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Anyone can find a single good reason to have PFI apart from putting debts off balance sheet (temporarily)?
Lightbulbs for £100 anyone?
The Treasury Select Committee has recommended that the liabilities of the controversial infrastructure projects to be "brought on balance sheet" in order to stop them being used to "circumvent departmental budget limits".
In a hard-hitting report, the Committee found that, despite being an "extremely inefficient" way of financing projects, there were "significant incentives to use PFI which are unrelated to value for money".
The MPs said "PFI allows Government departments and public bodies to make big capital investments without committing large sums up front".
Andrew Tyrie, chairman of the TSC, said: "PFI means getting something now and paying later. Any Whitehall department could be excused for becoming addicted to that."
He also called for an immediate overhaul of PFIs as a form of procurement. "These incentives unrelated to value for money need to be removed. Stricter rules and guidelines governing the use of PFI must be introduced," the Committee said.
The MPs found that the cost of capital for a typical PFI project is over 8pc – double the long-term government gilt rate of approximately 4pc.
An estimated £60bn of capital investment is already committed by private investors in PFI projects, including the building of schools, hospitals and other infrastructure projects.
When the Committee launched its investigation into PFI in March 2011, 61 new projects were being procured with an estimated investment value of £7bn.
The majority of PFI debt does not appear in official debt data. The Office of Budget Responsibility (OBR) has estimated if it were, Britain's national debt would increase by £35bn or 2.5pc of GDP.
Despite the "significantly higher cost of finance", the Committee said it had not found "evidence of savings and benefits in other areas of PFI projects".
Instead, they found that the "design innovation was worse in PFI projects and we have seen reports which found out that building quality was of a lower standard in PFI buildings."
The report added: "PFI is also inherently inflexible, especially for NHS projects.
"For too long PFI has been the 'only game in town' in some sectors which have not been provided with adequate capital budgets for their investment needs. This problem is likely to get worse in the future with capital budgets cut significantly at the Spending Review."
---
Anyone can find a single good reason to have PFI apart from putting debts off balance sheet (temporarily)?
Lightbulbs for £100 anyone?
