There is “little evidence” that successive UK governments’ use of the Private Finance Initiative scheme has resulted in lower construction costs or operational efficiency, the UK’s National Audit Office has said in a wide-ranging assessment.
The report, prepared before this week’s collapse of contractor Carillion, attempted to ascertain the rationale, costs and benefits of the financing structure used to procure a substantial amount of UK infrastructure since the early 1990s.
The NAO said, “there is little evidence that overall construction cost is lower under PFI” and there is no evidence of operational efficiency, which it says is, if anything, higher under PFI schemes. However, the NAO conceded that maintenance standards were higher under PFI, owing to provisions in the initiative’s contracts.
Additionally, while the auditor was able to determine the higher cost of financing for the projects, it said it was “unable to identify a robust evaluation of the actual performance of private finance at a project or programme level”, leaving it without the necessary data to provide a value-for-money assessment.
PFI was first used in Britain under John Major’s premiership in the early 1990s. Yet the scheme shot to prominence under his successors Tony Blair and Gordon Brown. It was reformed in 2012 with the launch of PF2 – however, the revamped model has been scarcely implemented, with government departments concerned about cost efficiencies and value for money.
In recent months, the programme has come under further pressure from the opposition Labour party. Shadow Chancellor John McDonnell vowed in September to bring all existing PFI contracts “back in-house” and banded PFI a “scandal”. The NAO report revealed that his incumbent counterparts don’t feel too dissimilar, with nine out of 10 departments saying they would be interested in buying out PFI deals if funding was available. Analysis by the NAO found that to terminate the 74 largest deals early would require a payment of £2 billion ($2.8 billion; €2.3 billion) to cover the cost of swaps as well as compensation payments to equity investors.