Letter: Private money

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The Independent Culture
Sir: John Denham, Minister of for Health, writes of the Private Finance Initiative: "Financial appraisals are used to ensure that schemes are only approved if they offer value for money" (letter, 16 July). What does this amount to?

Value for money is measured by comparing the cost of equivalent outputs being provided by the public sector, using a Treasury model. In the case of the Pimlico School PFI the public sector model sticks to government planning policies and builds around 50 private flats on the playgrounds; meanwhile the PFI bidder proposes 169 flats.

As a result around pounds 10m more is raised by the bidder to help offset the cost of the development, making the deal notionally cheaper - although only by pounds 1m, since the bidder's costs are actually pounds 9m higher than the public sector!

The value for money offered by PFI isn't worth the paper it's written on.