8/19/11

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.


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