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Private Finance Initiative Projects

September 15, 2008 1:40 PM
Originally published by UK Liberal Democrats

The Liberal Democrats today called on the Government to ensure that taxpayers get value for money when using Private Finance Initiatives (PFI).

New proposals approved by the Liberal Democrat Autumn Conference include: Only using private finance when it is shown that this can provide better value for money to the taxpayer than public finance.

Allowing local and devolved government to borrow money to invest, rather than having to use PFI.

Undertaking better evaluations of the value for money offered by PFIs.

Ensuring all PFI projects are included in government borrowing figures.

The full text of the motion is below. Mover: Jeremy Browne MP (Shadow Chief Secretary to the Treasury)

Summation: Chris White

Conference notes that:

A. There are currently over 500 operational PFI projects in the United Kingdom, with a combined capital value of £44 billion.

B. The use of PFI has made many hospital and school building programmes possible, which may well otherwise have never been given the go-ahead by the current Labour and previous Conservative governments.

C. PFI projects have had a degree of success, with a recent survey showing that two-thirds of public sector respondents rated the performance of their service provider as either good or very good.

Conference, however, notes with concern that:

i) PFI has been used as a mechanism to keep spending off government accounts and not to provide best value to the taxpayer.

ii) There have been several high-profile PFI projects which have failed, such as the London Underground-Metronet partnership, which has left the taxpayer shouldering more than £2bn of debt.

iii) Despite the presence of a private provider the taxpayer in effect continues to underwrite a large proportion of the risks, leading to cases where, for example, councils continue to pay for schools which have been closed.

iv) There has been massive variance with the cost-effectiveness of PFI contracts with, for example, the cost to the taxpayer of fitting a plug socket varying from £30 to £300.

Conference calls on the Government to:

1. Only use private finance when it is shown that this can provide better value for money to the taxpayer than public finance.

2. Make public financing options more practical by:

a) Opening up alternative financing options to local government, the Northern Irish and

Welsh assemblies, and the Scottish Parliament, by allowing them to borrow for investment where public sector financing is the best value option, following similar fiscal rules to those already in place for central government.

b) Allowing public sector bodies to bid on equal terms whenever provision of a public contract is tendered to ensure increased competition and proper comparison of all options.

c) Improving independent monitoring and evaluation of public sector comparators before projects are undertaken and of outcomes when projects are under way.

3. Ensure that all aspects of PFI projects are recorded on government accounts.

4. Ensure that public sector organisations have the necessary skills and are adequately trained to be competent buyers, ensuring that they secure the taxpayer good value for money.

5. Include an annual value-for-money report of PFI projects within the National Audit Office's remit.