Index

PF-I DON’T BELIEVE IT!

Rob Ray

A n explosive new report has found that PFI projects across Scotland could be costing around £2.1bn more than their state-run counterparts, a figure which would rise to more than £6bn if applied across the UK – enough to give every single public sector worker a £1,000 bonus with cash to spare.

The At what cost report, commissioned by Unison Scotland, investigated a number of projects across the country to calculate how much value for money they offered.

They found that not only were the costs of the projects massively in excess of their capital value, but that huge `insurance policies’ were being taken out, effectively eliminating the economic risks it is claimed PFI projects take on instead of the state.

The report noted: "An incredible £3.5 billion 'insurance’ policy is effectively paid to the private sector to cover the risks of things going wrong with the contracts. This is despite the fact that ultimately risk is effectively retained by the public sector, as shown by the recent collapse of London Underground PPP contractor Metronet."

Analysis of official figures from 35 schemes found that in comparison the public sector was on average 6.4% cheaper than outside PFI contractors.

While the capital value of all current projects in Scotland stands at £6.4 billion, the sums PFI companies have demanded for the work come in at amassive £22.3 billion over the course of their contracts, according to Unison.

Dave Watson, from Unison Scotland, said: "Our research published today confirms from the official figures that the scandal that is PFI is costing taxpayers in Scotland billions of pounds more than public sector funding.

"Documents show that funding new schools and hospitals the conventional way could cost around £2.1 billion less. They also show that £3.5 billion has been added to the taxpayers’ bill, to massage the figures in favour of private funding.

"These are just two figures from the range of ways in which private companies are profiteering at the expense of school children, hospital patients and taxpayers. Other factors include refinancing, high rates of return, the higher cost of private financing, land sales and the PFI private equity market."

Unison pointed to a range of factors contributing to the difference in price • between major public and private sector infrastructure projects, including the ability of the public sector to borrow at cheaper rates, the lack of a need to pay out shareholder dividends, and a substantial difference in available expertise.

Despite this, PFI companies have consistently undercut public sector `bidders’ in contract negotiations, thanks to a mechanism where public

sector bids are artificially inflated to take account of the 'risk factor’ of keeping work in-house.

The risk factor effectively artificially blocks the public sector from taking on new infrastructure projects.

Unison’s investigative team heavily criticised the lack of transparency surrounding PFI projects, which are not covered by public sector freedom of information legislation, strongly hampering investigations into their efficiency.

The Scottish parliament also came under fire for apparently failing to properly scrutinise the deals that were being made.

The team found that despite approving 102 PFI projects across the country worth a total of £22.3 billion the Scottish Executive had in several cases few of the key documents which would have allowed them to make an informed decision.

Final Business Cases — vital for decision making on the viability of projects — were absent in all nine of the country’s major sewage works developments.

A spokesman for the Scottish Executive has said the report will be "studied in detail".

The PFI sector has grown from its introduction 15 years ago to dominate a large swathe of public spending, with contracts worth £60 billion currently in place across the UK.

Rob Ray

– from Freedom, 20th October 2007

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