MPs slate private finance initiative for high cost and lack of visibility

An influential committee of MPs launched a stinging attack on private finance initiatives yesterday, claiming they offered taxpayers "poor value for money" and calling for debts built up from the schemes to be brought on to Britain's balance sheet.

An analysis by the Treasury Select Committee said that, as a result of the credit crisis, most PFI ventures – including many new schools and hospitals – were now hugely inefficient, with the cost of paying off a debt under PFI of £1bn equivalent to paying off a direct government debt of £1.7bn.

The average cost of capital for even a low-risk PFI project was more than 8 per cent – twice that of government gilts, the report said. The MPs said they had not "seen any convincing evidence that savings and efficiencies during the lifetime of PFI projects offset the significantly higher cost of finance".

Bringing PFI debt on to the state's balance sheet would add billions of pounds to the national debt and potentially put at risk the UK's prized AAA credit rating.

But Andrew Tyrie, the Conservative chairman of the committee, said: "PFI means getting something now and paying later. Any Whitehall department could be excused for becoming addicted to that. We cannot carry on as we are, expecting the next generation of taxpayers to pick up the tab. PFI should only be used where we can show clear benefits for the taxpayer."

Mr Tyrie called on the Treasury to "remove any perverse incentives unrelated to value for money by ensuring that PFI is not used to circumvent departmental budget limits".

PFI projects have not only been attacked for their ultimate cost to the public purse but for saddling schools and hospitals with billions of pounds of debts and huge interest bills they can ill afford at a time of financial austerity.