Treasury PFI efficiency claims 'unfounded'

Published on Thursday 5 April 2007 01:25

TREASURY claims that the government's flagship private finance initiative projects are cost-effective and save public money are "unfounded", according to researchers from Edinburgh University.

In a study published in the Public Money and Management journal, the research team, led by Professor Allyson Pollock, has analysed five studies cited by the Treasury as proof of PFI efficiency.

Pollock yesterday told The Scotsman that grounds for claims in the Treasury's policy statement 'PFI: Meeting the Investment Challenge' that nearly all PFI projects (88 per cent) were delivered on time and within budget - whereas 70 per cent of most public projects were delivered late with 73 per cent costing more than expected - were "either non-existent or false".

She added: "These findings are significant because government ministers have repeatedly justified the controversial PFI policy in terms of its greater efficiency and value for money savings compared with traditional methods of public investment. It would appear that comparisons are rigged in favour of PFI and that Treasury policy is not evidence-based."

She added that of the five reports cited as evidence by the government of PFI efficiency, two by the National Audit Office were based on interviews with managers of the PFI projects themselves. The NAO authors concluded that it was "not possible to judge from such evidence how the method of procurement affected the results".

A third study contained no comparative data at all to support claims of PFI effectiveness over non-PFI schemes, Prof Pollock said.

In the fourth study, researchers were even denied access, because the Treasury said the information was covered by commercial confidentiality, even though it had originally said it was happy to provide the information.

The only report out of the five to contain any comparative data was commissioned by the Treasury from a PFI consultancy and engineering firm, Mott Macdonald.

However, Prof Pollock's team found that this compared cost and time overruns in 39 public schemes, with just three out of the then 451 operational PFI schemes. They said the tiny sample was further biased by the exclusion of failed or troubled PFI schemes and the use of different baselines when comparing cost changes in non-PFI schemes with just three PFI schemes.

As a result, Pollock's team said cost increases known to occur in PFI were not taken into account while the cost of traditional public schemes was artificially inflated.

"It raises very serious questions about public accountability. There is just no evidence to support the Treasury claims of improved efficiency in PFI," Prof Pollock said.

A Treasury spokesman said: "The independent National Audit Office, not the Treasury, reports on the effectiveness of PFI projects, and it is them who state that PFI gives 'greater certainty'. PFI will continue to be used to deliver a small but important part of [government] investment, where it is shown to be value for money for taxpayers to do so."

TOP PFI PROJECTS

• 394m South Lanarkshire schools modernisation 2006

• 280.7m North Lanarkshire schools modernisation 2005

• 225m Glasgow City Schools modernisation 2000

• 194.2m Renfrewshire schools modernisation 2005

• 180m Lothian NHS Trust New ERI hospital 1998

• 170m East of Scotland Water Authority 1999

• 151.4 Argyll & Bute schools modernisation 2005

• 135m M77/Glasgow Southern Orbital Road 2003

• 124m East Ayrshire community schools 2006

• 124m Gt Glasgow NHS Stobhill and Victoris Ambulatory care 2006