Conservative MPs attack public finance initiative
Wednesday 17 April 1996
The Commons Treasury Committee also voiced concern that the PFI may not meet its target of funding pounds 14bn worth of public projects by 1999 - jeopardising scores of health, transport and education programmes.
Despite fresh measures announced two weeks by Michael Jack, the Financial Secretary, to strengthen the PFI, the MPs levelled a series of criticisms at the initiative.
They expressed particular concern that the PFI could end up distorting investment decisions and making long-term planning of the infrastructure more difficult because the private sector would select projects on the basis of profitability, not need.
The MPs also warned that the PFI could result in public spending running out of control because of the way private contractors fund the capital cost of projects and then receive payments from the Government for running and maintenance.
The PFI was launched in 1992 with a pledge by the then-Chancellor, Norman Lamont, that it would bring in additional private funds to supplement public capital spending.
But in their report the MPs said it had become obvious that the PFI was being used to replace public spending. According to the Government's latest forecasts, public sector capital spending will fall by pounds 2.5bn between this year and 1998/9 while PFI spending is projected to rise to pounds 2.6bn by 1997/8.
The MPs said, however, that the Government's projections of PFI spending were "optimistic" and added: "If there is a serious shortfall in the PFI projections, it will be difficult to provide money from public capital budgets to fill the gap."
One of the MPs' key recommendations is that the Treasury should now consider scrapping the rule which requires government departments to explore PFI funding before giving the go-ahead to any capital project.
Critics have claimed that this leads to the initiative being clogged up considering projects that are clearly unsuitable for private funding while important programmes, particularly hospital projects, are held back.
Clive Betts, a Labour member of the committee, said: "One of our biggest worries is that the only schemes which may go ahead are ones that the private sector will fund. That means decisions about public spending priorities are being taken, not in the political arena, but on the basis of what makes private profits."
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Weather bomb in pictures: Storms cuts power for tens of thousands – and snow is on the way
Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
Russell Brand was rendered speechless on Question Time by this man
Fury at Airbus after it hints the super-jumbo may be mothballed
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...