Smith apologises for inventing report on PFI 'success'

The Chief Secretary to the Treasury apologised personally to an MP yesterday for "inventing" a report claiming the Government's flagship Private Finance Initiative (PFI) was a success.

Andrew Smith telephoned David Laws, Liberal Democrat MP for Yeovil, yesterday morning after The Independent disclosed that a report to which the minister had referred in the House of Commons did not exist. He promised to correct it formally in Parliament.

The Speaker of the House of Commons also intervened in the matter to allow the "made-up" report to be raised formally before MPs.

Mr Laws accused the Treasury on the floor of the House of Commons of having "clearly misled the House".

The Speaker told MPs that "there was indeed an error" and that "the Chief Secretary is taking steps to correct it at an early opportunity".

The Liberal Democrats accused the Treasury minister of manipulating the facts to exaggerate savings made by the PFI, which involves bringing private finance into big public-sector capital projects.

In the same reply in which he referred to the "invented report" Mr Smith mentioned seven PFI projects examined by the National Audit Office that brought "just under £1 billion" of savings.

But the Treasury failed to consider the conclusions of four further reports by the National Audit Office on PFI projects where losses were made, which would have reduced the savings from "just under £1 billion" to £61.6m.

Matthew Taylor, Liberal Democrat Treasury spokesman said: "This is proof that the Government is all spin and no substance. It is time the Treasury set the record straight on PFI. Several government departments have made basic errors in their calculations on value for money.

"The truth is that if every independent study is taken into account then the gains from PFI are few and far between."

The controversy emerged after the Treasury minister referred to a non-existent report by the Government's financial watchdog, the National Audit Office (NAO) last Wednesday to demonstrate that the PFI "found an average saving of 20 per cent".

But the NAO told The Independent the report "did not exist" and that it had never performed such an analysis.