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News - 23 August 2011

Private Finance Initiative funding a new report

A new report published on 19 August 2011 by the Treasury Select Committee has concluded that Private Finance Initiative (PFI) funding for new infrastructure, such as schools and hospitals, does not provide taxpayers with good value for money and stricter criteria should be introduced to govern its use.

Chairman of the Treasury Select Committee, Andrew Tyrie MP, said:

"PFI means getting something now and paying later. Any Whitehall department could be excused for becoming addicted to that."

According to the Committee, higher borrowing costs since the credit crisis mean that PFI is now an ‘extremely inefficient’ method of financing projects. However, poor investment decisions may continue to be encouraged across the public sector because PFI allows Government departments and public bodies to make big capital investments without committing large sums up front.

The Committee has not seen any convincing evidence that savings and efficiencies during the lifetime of PFI projects offset the significantly higher cost of finance. Indeed, the Report raises concerns that the current Value for Money appraisal system is biased to favour PFIs. It identifies a number of problems with the way costs and benefits for such projects are currently calculated.

Lavinia Newman of ABDS says:

"PFI should be brought on balance sheet, and should only be used where there are clear benefits for the taxpayer. This will be tough in the short term but it should benefit the economy and public finances in the longer term."

If you need any help and advice for your business or financial planning don’t hesitate, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar NOW to discuss how ABDS can help.

ABDS of Southampton. For all of your Financial and Business Development requirements

Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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