TAXPAYERS are missing out on millions of pounds when PFI debts are refinanced, MPs said yesterday.
They claimed public-sector bodies were partly to blame because they were too commercially naive to secure best value through PFI (Private Finance Initiative).
The report from the Public Accounts Committee lists 26 Welsh PFI schemes, ranging all the way from the Severn Crossing down to a hospital heating system.
The eventual total payments for each contract are shown to be about five times the original capital cost of each project or building, with a £25m schools project in Caerphilly going on to cost £126m in total.
Under a PFI scheme, projects such as schools or hospitals are designed, built, financed and managed by a private sector consortium, under a contract that usually lasts 30 years. It saves public bodies making big one-off payments.
The consortium is paid regularly from public money, depending on its performance during that period.
But critics say that, as with anything bought over a long-term rather than a one-off payment, such means of payment usually costs more in the long run.
Yesterday’s report found private profits had swollen by hundreds of millions of pounds through refinancing their PFI debts – usually after the risky construction phase – while the public sector’s gain from refinancing deals had fallen about £100m short of government predictions.
The committee warned that negotiations on PFI projects were left in the hands of local government officials who were “often painfully lacking in commercial experience” – and urged the Treasury to take final responsibility for approving sensitive refinancing deals.
Welsh PFI projects listed in the report include:
Ysgol Gyfun Cwm Rhymni and Lewis Boys’ School, Caerphilly, with a £25m capital cost and payments totalling £126m;
A £300,000 heating system at Prince Philip Hospital, Llanelli, with payments totalling about £1.5m over 15 years;
A £15m divisional HQ for North Wales Police in St Asaph, with repayments of £71m;
Lloyd George Avenue and Callaghan Square, Cardiff, with a cost of £45m and repayments of £174m;
A £12.1m office building for Denbighshire council, with repayments of £63m.
A North Wales Police spokesperson said, “These are the rules and conditions by which we have to finance capital projects.”
Carmarthenshire NHS Trust defended its heating system in Llanelli, saying the annual payments included steam, water, heating and some electricity from the combined heat and power plant.
But Jonathan Fielden, chairman of the British Medical Association’s consultants’ committee, said, “We can see just how damaging this is as so many NHS trusts are currently crippled with debts and are struggling to meet PFI repayments. This is already directly affecting patient care.”
A Treasury spokesman said, “The taxpayer has derived significant benefits from the Government’s introduction of a voluntary code and 50/50 gain- sharing for PFI refinancings.
“Although there is no current evidence that the secondary equity market is working ineffectively we continue to monitor developments in the market, both with other departments and with key investors.”