Skip to main content

P3s don't provide value for money: British House of Commons Treasury Cttee

Public private partnership "funding for new infrastructure, such as schools and hospitals, does not provide taxpayers with good value for money," according to the Treasury Select Committee of the British House of Commons.

The Committee found that the capital cost of even a low risk P3 project is over 8%  – double the long-term cost of government borrowing.

Higher borrowing costs since the credit crisis mean that PFI (as the British call P3s)  is now an ‘extremely inefficient’ method of financing projects, according to the Committee. Analysis commissioned by the Committee suggests that paying off a PFI debt of £1bn may cost taxpayers the same as paying off a direct government debt of £1.7bn.

The Committee also stated it has "not seen any convincing evidence that savings and efficiencies during the lifetime of PFI projects offset the significantly higher cost of finance."

The business publication Health Investor adds that PFI schemes perform poorly in some respects such as design innovation, and  flexibility – something that is of particular concern when it comes to health care projects.

The committee concluded that the widespread use of the model over the last 15 years was because of "significant incentives... which are unrelated to value for money". These include the fact that PFI does not appear in government debt figures, and do not use up limited departmental capital funding, according to Health Investor.

The Conservative Party Chairman of the House of Commons Select Committee states the PFI funding mechanism should be used "as sparingly as possible until the value for money and absolute cost problems associated with PFI have been addressed." "We can’t carry on as we are, expecting the next generation of taxpayers to pick up the tab," he added.
 
OCHU and CUPE have long claimed that the supposed benefits of P3 projects (like risk transfer) were overstated and did not make up for the extra costs associated with P3s. 

The Treasury Select Committee also "raises concerns that the current Value for Money appraisal system is biased to favour PFIs," another point long raised by P3 critics in Canada.

The British public sector union UNISON is calling on the government to ditch P3s in its response to the Committee report.  The Treasury Select Committee report is available here.


Comments

Popular posts from this blog

Public sector employment in Ontario is far below the rest of Canada

The suggestion that Ontario has a deficit because its public sector is too large does not bear scrutiny. Consider the following. 

Public sector employment has fallen in the last three quarters in Ontario.  Since 2011, public sector employment has been pretty flat, with employment up less than 4 tenths of one percent in the first half of 2015 compared with the first half of 2011.


This contrasts with public sector employment outside of Ontario which has gone up pretty consistently and is now 4.7% higher than it was in the first half of 2011.



Private sector employment has also gone up consistently over that period. In Ontario, it has increased 4.3% since the first half of 2011, while in Canada as a whole it has increased 4.9%.







As a result, public sector employment in Ontario is now shrinking as a percentage of the private sector workforce.  In contrast, in the rest of Canada, it is increasing. Moreover, public sector employment is muchhigher in the rest of Canada than in Ontario.  Indeed as…

The long series of failures of private clinics in Ontario

For many years, OCHU/CUPE has been concerned the Ontario government would transfer public hospital surgeries, procedures and diagnostic tests to private clinics. CUPE began campaigning in earnest against this possibility in the spring of 2007 with a tour of the province by former British Health Secretary, Frank Dobson, who talked about the disastrous British experience with private surgical clinics.

The door opened years ago with the introduction of fee-for-service hospital funding (sometimes called Quality Based Funding). Then in the fall of 2013 the government announced regulatory changes to facilitate this privatization. The government announced Request for Proposals for the summer of 2014 to expand the role of "Independent Health Facilities" (IHFs). 

With mass campaigns to stop the private clinic expansion by the Ontario Health Coalition the process slowed.  

But it seems the provincial Liberal government continues to push the idea.  Following a recent second OCHU tour wi…

Hospital worker sick leave: too much or too little?

Ontario hospital workers are muchless absent due to illness or disability than hospital workers Canada-wide.  In 2014, Ontario hospital workers were absent 10.2 days due to illness or disability, 2.9 days less than the Canada wide average – i.e. 22% less.  In fact, Ontario hospital workers have had consistently fewer sick days for years.

This is also true if absences due to family or personal responsibilities are included.
Statistics Canada data for the last fifteen years for Canada and Ontario are reported in the chart below, showing Ontario hospital workers are consistently off work less.
Assuming, Ontario accounts for about 38% of the Canada-wide hospital workforce, these figures suggest that the days lost due to illness of injury in Canada excluding Ontario are about 13.6 days per year ([13.6 x 0.68] + [10.2 x 0.38] = 13.1).

In other words, hospital workers in the rest of Canada are absent from work due to illness or disability 1/3 more than Ontario hospital workers. 

In fact, Canad…