PFI deals have led to price rises, say MPs

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Ministers have been accused of failing to learn the lessons of hundreds of private finance initiative deals amid warnings that public services are being cut back to pay for price increases.

MPs said that market testing exercises designed to drive down the cost of PFI deals actually resulted in price increases of up to 14 per cent. Members of the Commons Public Accounts Committee warned that the reviews, which take place around every five years, led to price rises in more than half the deals examined by the group.

A report warned that contractors still had "the whip hand" in negotiations over the long-term deals because of a lack of expertise in public bodies. It said that public sector managers were often at a disadvantage in negotiations because they lacked the information to compare prices.

MPs also warned that the average length of time for tenders to be completed was three years, discouraging competition between contractors.

Edward Leigh, the Tory MP and committee's chairman, said: "PFI deals were supposed to give us certainty about the long-term costs of providing public services. The reality is different. The value for money is in some cases uncertain. I am concerned at evidence that public authorities are cutting such services to keep the PFI contracts affordable."

Vince Cable, the acting Liberal Democrat leader said: "Time and again the Government has proved itself woefully bad at putting PFI contracts out to tender.

"The Government's record on dealing with big projects, such as those in HMRC and the under valuation of QinetiQ, show that ministers just don't have the competence to get value for money in these negotiations.

"While the use of PFI has helped create many new schools and hospitals, which may otherwise never have been built, the Government's procurement practices have meant that in many cases taxpayers have not got value for money."