Global Policy Forum

by Danny Perman

Schools and hospitals are failing to gain significant value for money from the private finance initiative (PFI), according to a report from a pro-New Labour thinktank.

The report by the Institute of Public Policy Research (IPPR) claims that the PFI can deliver good value in prisons and road-building projects but the gains For education and healthcare are "much less impressive".

Paul Maltby, spokesman for the IPPR, said: "In theory the PFI can deliver better quality services at less cost to the taxpayer but there is currently no evidence about whether the PFI delivers once schemes are up and running.

"Where the PFI is shown to deliver poor results the government should not be afraid to use alternative options, including other types of public private partnership. The government needs to commission an independent review of the PFI so we know where it is and is not working."

Only 23 out of 378 PFI projects - just 6% - have been independently audited to see if they offer value for money, says the IPPR. The Labour party conference voted in October to conduct a full review of the economics of PFI. The government has so far failed to do so.

Dave Prentis, the general secretary of Unison, described the report as "yet another nail in the coffin" of the PFI. "We all want new schools and hospitals but taxpayers should not be made to pay through the nose for them. The money invested in these schemes should be going straight into patient care and into educating our children not into lining the pockets of private companies."

The PFI is running into problems in an unexpected quarter. Business is becoming increasingly wary of becoming involved, partly because of bidding costs and the length of time it takes for new contracts to be signed. Amey, the troubled support services company, has just been forced to write-off £85m from the book value of its assets. The write-offs relate mainly to its interest in Croydon Tramlink and to the proposed sale of a portfolio of equity stakes in PFI projects. As a result, it has been forced to slash its dividend.

Mitie, another frequent PFI bidder, is scaling back its interest in the projects. It claims the government's enthusiasm is not matched by its commitment and said the "two to three year gestation period" and the "very high legal costs" had dissuaded it from investing PFI projects.

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