PFI – not value for money, offshore companies paying little tax own strategic assets

“The private finance initiative has created “immense pain” for councils and the Treasury cannot back up claims that it represents value for money for the taxpayer, a review has found.

The Commons public accounts committee has demanded that the government “comes clean” about the value of PFI and has accused it of having no plans to examine whether the initiative delivers financial benefits.

The committee said that what it had found was “unacceptable”. Meg Hillier, its chairwoman, said: “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 public accounts committee launched its review of PFI and PF2, the second iteration of the initiative, in January after an inquiry by the spending watchdog found that the taxpayer would foot a £200 million bill for the contentious contracts.

Its findings show that PFI deals have allowed offshore investment funds, which pay little tax in Britain, to own billions of pounds of public infrastructure. Offshore funds have bought about half of the £60 billion of schools, hospitals, roads and other infrastructure assets built through 700 PFI deals signed in the past 25 years. That has resulted in owners of public services being “increasingly remote” from the services themselves, the MPs said.

The government has used PFI deals for 25 years to build public infrastructure assets such as schools, hospitals and roads. Under such deals the public sector signs a contract with a private company, which raises money to fund the asset and leases it to the government. Typically the leases run for 25 to 30 years. The government has paid £110 billion to private companies under the contracts and will pay a further £199 billion by the 2040s for existing deals alone.

The arrangement has faced repeated criticism. In January the National Audit Office said there was little evidence that government investment in public-private projects had delivered financial benefits. PFI contracts have been attacked, too, for being inflexible, sometimes leaving councils with a large bill for assets that are not in use.

“It is critical that taxpayers are not further lumbered with excessive costs arising from poor contracting,” Ms Hillier said.”

Source: Times (pay wall)