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Labour government 'ignored cheaper alternatives to PFI'

احدث اجدد واروع واجمل واشيك Labour government 'ignored cheaper alternatives to PFI'

The Labour government gave its ministers no choice but to use PFI to build new houses and hospitals – despite the fact that in some cases it could have been cheaper for the state to fund them directly, a powerful committee of MPs report today.

There was often no clear justification for using PFI – privately financed initiatives – to build new homes and hospitals, and the coalition government should now explain any further use of the schemes and seek cheaper options before giving them the go-ahead, the public accounts committee concluded today.

The report drew a sharp response from business leaders, who warned against ministers trying to renegotiate contracts to get a better deal for taxpayers, suggesting that with constrained public finances, the role of PFI could become even more important.

Most PFI schemes involve private sector investment to build public sector facilities, which are then let back to the public sector. The schemes were invented by the last Tory government, but flourished under Labour, which used them to build hundreds of schools, hospitals and houses. They have been criticised for being expensive and running into delays.

Today's report focuses on hospitals and housing, and says: "We … found no clear and explicit justification and evaluation for the use of PFI in terms of its value for money. However, we accept that the then government gave the departments no realistic alternatives to PFI as the procurement route to use for these capital programmes."

The last government then failed to cash in on its economies of scale to drive costs down by demanding discounts from major suppliers, it finds.

Margaret Hodge, the Labour chair of the public accounts committee in the Commons, said: "Local authorities and health trusts used PFI because there was no realistic alternative, not because it represented best value for money

"The use of PFI and its alternatives should now be robustly evaluated. Looking back at PFI procurements, the government should also do more to find out where and why PFI works best and capture the lessons. Departments should also do more to ensure they get the best out of existing PFI contracts.

"By bundling together large numbers of PFI projects, private sector investors may use the consequent economies of scale to drive up the value of their interests and generate bigger profits. We are concerned that the benefits arising from these economies of scale are not being shared by the taxpayer.

"At a time when public finances are so tight, government must use the weight of its buying power to negotiate with major PFI investors and contractors a better deal for the taxpayer."

Elizabeth Fells, head of public service reform at the Confederation of British Industry, said: "PFI has resulted in hundreds of hospitals, homes and schools being built, benefiting communities up and down the land. It is an established and successful way of developing and maintaining infrastructure, with the majority of projects delivered on time and on budget.

"With the public finances constrained, the role of the private sector in supporting new infrastructure will become even more important. Any moves to challenge existing contracts will undermine private sector confidence, jeopardising future investment in crucial infrastructure projects.

"As the committee has previously noted, the government needs a variety of finance options available to it. These should include new methods, such as tax increment funding and pension fund financing, as well as PFI."

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