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PFI schemes must not be 'Profit for Incompetence' says Lib Dem

September 14, 2008 9:00 PM

Reacting to today's debate at the Liberal Democrat Conference in Bournemouth about Private Finance Initiative schemes (PFI) Andrew Simpson has called for greater scrutiny and management of PFI when used to provide public services.

"In Northamptonshire we have had one of the largest group of schools in a PFI scheme in the country yet whilst this has delivered shiny new schools and what ultimate cost to the Council tax payer" said Andrew "There has been evidence of profiteering by companies involved when doing simple changes to the new buildings such as moving plug sockets or computer terminals. We must make sure it doesn't become a case of 'profit for incompetence'".

The Liberal Democrats passed the motion below at their conference and agreed that in some circumstances PFI can help provide vital funds to improve public services but greater controls and tests for value for money are needed.

"The Government also needs to be accountable for PFI through a clear list of schemes running across the country and the result"

Private Finance Initiatives

Conference notes that:

A. There are currently over 500 operational PFI projects in the United Kingdom, with a combined

capital value of £44 billion.

B. The use of PFI has made many hospital and school building programmes possible, which

may well otherwise have never been given the go-ahead by the current Labour and previous

Conservative governments.

C. PFI projects have had a degree of success, with a recent survey showing that two-thirds of

public sector respondents rated the performance of their service provider as either good or

very good.

Conference, however, notes with concern that:

i) PFI has been used as a mechanism to keep spending off government accounts and not to

provide best value to the taxpayer.

ii) There have been several high-profile PFI projects which have failed, such as the London

Underground-Metronet partnership, which has left the taxpayer shouldering more than £2bn

of debt.

iii) Despite the presence of a private provider the taxpayer in effect continues to underwrite a

large proportion of the risks, leading to cases where, for example, councils continue to pay for

schools which have been closed.

iv) There has been massive variance with the cost-effectiveness of PFI contracts with, for example,

the cost to the taxpayer of fitting a plug socket varying from £30 to £300.

Conference calls on the Government to:

1. Only use private finance when it is shown that this can provide better value for money to the

taxpayer than public finance.

2. Make public financing options more practical by:

a) Opening up alternative financing options to local government, the Northern Irish and

Welsh assemblies, and the Scottish Parliament, by allowing them to borrow for investment

where public sector financing is the best value option, following similar fiscal rules to

those already in place for central government.

b) Allowing public sector bodies to bid on equal terms whenever provision of a public

contract is tendered to ensure increased competition and proper comparison of all


c) Improving independent monitoring and evaluation of public sector comparators before

projects are undertaken and of outcomes when projects are under way.

3. Ensure that all aspects of PFI projects are recorded on government accounts.

4. Ensure that public sector organisations have the necessary skills and are adequately trained to

be competent buyers, ensuring that they secure the taxpayer good value for money.

5. Include an annual value-for-money report of PFI projects within the National Audit Office's


Applicability: Federal or England only, depending on the particular service affected.