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

Ford Plans to Cut Health Care Worker Benefits by $250 million

Attack on health care worker benefits: The Ontario Ford government has specifically targeted in the Budget health care worker compensation  through cuts in premium payments (e.g. shift payments), overtime, and sick leave. "Improving" scheduling is also part of the plan.  The stated goalis to cut $250 million annually through such changes by 2021-22.

This is squarely aimed at hourly paid employees. Managers don't get overtime and premium payments, and they are not likely to be targeted by attendance management programs or scheduling "improvements". 

With about half a million hourly paid employees working in health care a $250 million cut would mean about a cut of about $500 per employee per year.  

The Ford government claims in the Budget that this will have "no impact on patient care or front-line staff."

In fact, a $500 cut may be low -- as it will be especially hard to harvest such amounts from contracted, for-profit corporations (e.g. in home care).  T…

Are health care administrative expenses out of control in Ontario?

The Progressive Conservative government has justified its health restructuring plans with the claim that administrative expenses are much higher in Ontario than in Canada. 
When introducing the reforms, health minister Christine Elliott claimed, “Over the last five years, Ontario has spent 30% more than the Canadian average in administrative expenses on its health care system.”  
Elliott did not indicate her source of information. Presumably, however, the Progressive Conservatives are referring to the CIHI simplified and user friendly “Your Health System” graphs. Those graphs show “administrative expenses” in Ontario at 5.8% in Ontario while it is 4.5% in Canada.  
This CIHI measure is actually fairly narrowly defined. It is the percentage of “the legal entity’s” total expenses associated with the administrative, finance, human resources and communications functional centres.
However “the legal entity” used for this estimate is [1] only for certain types of health care providers, and [2] …

Health Care Funding Means Cuts are Coming (and its Armageddon for other programs)

The group that will do the best out of the recent provincial Budget are the doctors.  According to the just released Budget Estimates, OHIP funding (which  goes overwhelmingly to physicians and practitioners) will go up $1.2 billion or 8% compared to last year's Estimates. 

(Note -- this is a little different, and less accurate, than the comparisons with last year's interim amounts reported in the 2019 Budget and used elsewhere in this note.  It is the only comparison publicly available for OHIP as of the moment, however. The Financial Accountability Office has suggested that the actual OHIP spend last year would be less than in the Estimates by several hundred million. So the actual increase this year may be larger than $1.2 billion. We will know for sure when the Public Accounts finalize the books for 2018-19 in September.)  

This large increase is likely due to the February 2019 interest arbitration award for doctors, an award that was praised as "fair" by Christine…