By Max Clarke

Private Finance Initiatives as a means of delivering infrastructure projects appear to deliver better value for private sector contractors than for the taxpayer, the Commons Public Accounts Committee stated this morning in its report into the controversial contracts.

Currently, some 700 PFI contracts have been awarded to a host of companies, used to build numerous public sector contracts, including schools, hospitals and roads. And while they have been highly successful in delivering such projects, the Committee feels they have been wrongly touted by government as the only viable option for new projects, with insufficient research.

In particular, some of the larger companies managing several lucrative PFI contracts- generating sizeable profits- are backed by offshore, and therefore untaxeable, investors.

“It is a disgrace that many of the PFI investors are registered offshore for tax purposes,” commented public sector union chief, Dave Prentis. “They are literally ripping the taxpayer off twice — and making huge profits in the process.”

The Committee’s report outlined the key issues with the scheme: At present, PFI deals look better value for the private sector than for the taxpayer. Private sector funds have built up portfolios of PFI projects from the large market that government has created. The private sector manage these projects as a portfolio, benefiting from potential economies of scale without any obligation to share such volume gains.

Government, in contrast, has a fragmented approach and is not making use of its bulk buying power. The committee accepts that contracts have got tighter over time and that the Treasury is seeking further efficiency savings, and would urge a bold and speedy approach. Achieving any savings on existing contracts will depend on voluntary agreements with investors and suppliers. The committee looks forward to the results of a pilot project seeking to identify opportunities for public sector wide savings from existing contracts. The onus is on the Treasury and departments to negotiate tangible savings without putting the quality of public services at risk.

Join us on
Follow @freshbusiness