The government does not provide taxpayers with value for money and has weak guidelines for Private Finance Initiative (PFI) funding for new infrastructure, according to a committee of MPs
The Treasury Select Committee has found that higher borrowing costs since the credit crisis has made PFI an ‘extremely inefficient’ method of financing projects.
Poor investment decisions are still continuing across the public sector, however, because PFI allows government departments and public bodies to make big capital investments without committing large sums up front.
Treasury Select Committee chairman, Andrew Tyrie, said: ‘We can’t carry on as we are, expecting the next generation of taxpayers to pick up the tab.
‘PFI should only be used where we can show clear benefits for the taxpayer. We must first acknowledge we’ve got a problem. This will be tough in the short term but it should benefit the economy and public finances in the longer term.
‘We must also impose much more robust criteria on projects that can be eligible for PFI by ensuring that as much as possible of the risk associated with projects is transferred to the private sector and is seen to have been transferred.’
The committee also called for the PFI value assessment process to be scrutinised by the National Audit Office.
The CBI said the government needs to make quick decisions on the future of PFI.
Deputy director-general Neil Bentley, said: ‘The committee’s report is right to say lessons from the past need to be heeded, and PFI must only be used when it is appropriate and offers the best value for money.
‘But with the state of the public finances, it is absolutely essential we attract the billions of pounds of private finance needed to upgrade our national infrastructure and boost jobs and growth.
‘To do this, investors need confidence, and the government must decide sooner rather than later how PFI will evolve.’