Taxpayers are shelling out £10billion a year on PFI fees and shafted by shoddy Government deals, report reveals
Ministers under pressure to review PFI deals after damning report finds taxpayers shell out £10bn per year for Private Finance Initiatives
MINISTERS came under fresh pressure to review PFI after a damning report found taxpayers are spending £10billion a year on fees.
Amid a growing row over the use of Private Finance Initiatives in the wake of the Carillion collapse, the Government’s spending watchdog warned that taxpayers are facing a soaring bill to pay for external advisers, lender fees and spiralling insurance costs.
It means the total bill to private contractors will reach £199bilion for schemes under PFI - even if no further deals are struck.
The National Audit Office (NAO) found 716 deals are currently operational under PFI and its successor PF2.
Under the schemes private consortiums raise funding to build public facilities like schools, hospitals and roads, in return for regular payments over as many as 30 years.
The NAO report delivered a damning verdict on the Treasury for failing to set out what benefits PFI brings in terms of savings for the taxpayer. As a result the NAO was unable to draw any conclusions on the merits of PFI and PF2.
The report was compiled before the collapse of contractor Carillion. But its release came as the construction giant’s failure sparked furious debate about the future of a system which Labour leader Jeremy Corbyn denounced as a “costly racket”.
He told Theresa May at Prime Minister’s Questions in the Commons yesterday that corporations contracted to build public projects must be “shown the door”.
He said: “We need our public services provided by public employees with a public service ethos and a strong public oversight.”
The GMB union said the scale of payments revealed by the NAO should mean the “game is up” for PFI - declaring it a “waste of taxpayer’s money”.
The NAO report found that the private finance route “results in additional costs compared to publicly financed procurement”.
The Government’s National Infrastructure Plan suggested in 2010 that capital raised through PFI cost 2 per cent to 3.75 per cent more than from state borrowing, the NAO said.
And it added: “Small changes to the cost of capital can have a significant impact on costs.
“Paying off a debt of £100 million over 30 years with interest of 2 per cent costs £34 million in interest. At 4% this more than doubles to £73 million.”
The report said there had not yet been a “robust evaluation” of whether this was offset, as PFI supporters claim, by benefits such as reduced risk to the taxpayer and higher-quality facilities.