UK owes £1bn extra on PFIs
PUBLIC spending came under fresh scrutiny yesterday, after new figures suggested taxpayers will shell out up to £1bn extra over the next 30 years to pay for PFI projects, while the state struggles to reverse a decline in productivity.
The running costs of Private Finance Initiatives (PFI) agreed during the credit crisis will be between £500m and £1bn, said the National Audit Office (NAO), though it said the schemes represented good value for money for boosting the economy.
Analysis by the NAO suggested that the higher lending costs during the credit crunch were responsible for pushing the cost of PFI schemes up by six to seven per cent.
The NAO warned that in the future the government “should not presume that continuing the use of private finance at current rates will be value for money”.
“The Treasury helped reactivate the market and prevent the stalling of many government projects,” said auditor general Amyas Morse. “[But] now that the market is providing finance again, a project-by-project review should be carried out using stricter criteria to establish the most appropriate funding methods.”
Meanwhile, the Office for National Statistics said productivity in the public sector fell by 0.9 per cent in 2008, ending several years of modest rises.
The ONS measured two-thirds of State workers by comparing results such as NHS targets with inputs of labour, materials and capital assets.
The ONS said public sector output has failed to keep up with a total input increase of 41.5 per cent since 1997. Productivity since Labour gained power fell by an average of 0.3 per cent per year.