“Cost of privately financing projects ‘can be 40% higher’ than using public money
Taxpayers will be forced to hand over nearly £200bn to contractors under private finance deals for at least 25 years, according to a report by Whitehall’s spending watchdog.
In the wake of the collapse of public service provider Carillion, the National Audit Office found little evidence that government investment in more than 700 existing public-private projects has delivered financial benefits.
The cost of privately financing public projects can be 40% higher than relying solely upon government money, auditors found.
They also disclosed that the government has a £35m equity stake in one of Carillion’s major projects – public money that is now at risk. …
There are currently 716 operational private finance deals with a capital value of around £60bn, the report said.
Annual charges for these deals amounted to £10.3bn in 2016-17. Even if no new deals are entered into, future charges that continue until the 2040s amount to £199bn, it said – money that could finance the entire NHS for 20 months. …
“After 25 years of PFI, there is still little evidence that it delivers enough benefit to offset the additional costs of borrowing money privately,” she said. “Many local bodies are now shackled to inflexible PFI contracts that are exorbitantly expensive to change.
“I am concerned that [the] treasury has relaunched PFI under new branding, without doing anything about most of its underlying problems. We need more investment in our schools and hospitals but if we get the contracts wrong, taxpayers pay the price,” she said.
Research by auditors found that private investors who charge public bodies for insurance on each project, have not passed on 15 years of lower insurance costs.
“Public bodies are paying more for insurance than the actual cost, providing a gain to [private] investors,” it said. …”