Minister 'invented' report showing his policy was success

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A Treasury minister was accused last night of misleading Parliament by "inventing" a report claiming the Government's flagship Private Finance Initiative was a success.

Andrew Smith, Chief Secretary to the Treasury, is facing criticism after referring to a non-existent report by the Government's financial watchdog to demonstrate that the PFI gave the taxpayer good value.

He told Parliament last Wednesday that there have been "two substantive reports on PFI ... which have indicated that PFI is delivering value for money". A report by the National Audit Office (NAO), entitled PFI and Value for Money, he said, "found an average saving of 20 per cent".

But last night opposition MPs accused Mr Smith of misleading Parliament after the disclosure that the report does not exist. The Liberal Democrat Treasury spokesman, Matthew Taylor, will call on Mr Smith today to apologise to the House of Commons. "It seems that the Treasury has now resorted to making up reports in favour of PFI. The truth is that most studies show PFI brings no new funds to public services, and is actually often both more expensive and delivers a worse service," he said. "Andrew Smith has known his answer was wrong since last week. It is about time he apologised."

The NAO confirmed last night that the report PFI and Value for Money, which Mr Smith referred to, "did not exist". The Government's financial watchdog said it had never done an analysis of whether the PFI, used to finance big public projects such as new hospitals, offered value for the taxpayer.

It said that it planned to raise the misleading answer with the Treasury.

"We are aware that this is incorrect," said an NAO spokesman. "We have done 20 different reports on individual PFI projects. We have never looked at whether PFI is bad or good generally."

In a reply to David Laws, the Liberal Democrat MP for Yeovil, about the PFI, Mr Smith had said: "There have been two substantive reports on PFI, since its inception, which have indicated that PFI is delivering value for money. The independent Arthur Andersen and Enterprise LSE Report ... Also the NAO report PFI and Value for Money found an average cost saving of 20 per cent, or just under £1bn in total, across seven projects examined by the NAO up until December 1999."

Last night a spokesman for Mr Smith blamed a "typographical error" for the problem with his remarks.