UK taxpayer to foot £200bn bill for PFI projects - NAO
The UK taxpayer will be on the hook to the tune of £200bn into the 2040s under private financing deals even if no new projects are agreed, the government's spending watchdog said on Thursday.
In a report on the costs and benefits of the controversial financing vehicle, the National Audit Office (NAO) said there were more than 700 existing private finance initiative (PFI) projects, and a “lack of data” on their financial benefits.
The evidence was gathered before this week's collapse of government contractor Carillion which has placed thousands of jobs at risk right through its supply chain.
The NAO said the 716 deals accumulated an annual charge of £10.3bn in 2016/17 which will stretch into the 2040s.
Opposition Labour MP Stella Creasy described PFI companies as "the loan sharks of the public sector".
"It’s like a payday loan or a hire purchase agreement to build a school or a hospital and then run one," she said.
The cost of privately financing public projects could be 40% higher than relying solely upon government money, the report found.
“Private finance procurement results in additional costs compared to publicly financed procurement, the most visible being the higher cost of finance,” the NAO said.
It added that the 2010 National Infrastructure Plan estimated the cost of capital raising at 2% to 3.75% more than government borrowing.
“Data collected by the Infrastructure and Projects Authority on deals entered into since 2013 show that debt and equity investors are forecast to receive a return of between 2% and 4% above government borrowing,” the NAO said.
“However, some 2013 deals, agreed when credit market conditions were poor, projected an annual return for debt and equity investors of over 8%; this was more than 5% higher than the cost of government borrowing at the time.”
Creasy called for a windfall tax on PFI firms, claiming that companies had benefited from cuts in corporation tax.
"We are estimating that some of them have saved around £190m in corporation tax payments alone. That is money that is owed to our public sector, and is money we could get back with a windfall tax."