A report today says the Private Finance Initiative – PFI – has been largely successful since it was introduced twelve years ago, with more than 450 new public facilities completed between 1997 and last year. But the report, published by the Centre for Policy Studies, accuses the government of misusing PFI.”Reforming the Private Finance Initiative”, says 88 per cent of PFI projects have been delivered on time or early and with no cost overruns being borne by the public sector. By contrast, it says, 70 per cent of traditional public-sector schemes were late and 73 per cent went over budget.
The report says PFI already accounts for about ten per cent of all government expenditure on public services and predicts that the figure will increase.
It has been written by Philippa Rose, a director of an investment bank who has been involved with PFI since its inception, and Alastair Craig, a chartered tax advisor. They accuse the government of misusing PFI by classifying some projects as “off balance sheet”. This, they say, has enabled the government to deliver public sector projects without affecting its borrowing requirements.
Some schemes, they say, have gone ahead as PFI projects not because they offered better value for money to the taxpayer but because of convenience in terms of government accounting. Further, they claim that PFI is creating a mortgage on the public sector.
The authors make a number of recommendations including delaying consideration of the accounting treatment of a deal until after the decision is taken to go ahead with it as PFI project. They also want greater transparency in government liabilities for PFI projects with specialist PFI units in major spending departments being given authority and accountability to develop sector-specific PFI expertise.