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PFI project costs exceed £200bn

The taxpayer’s commitment to pay for hospitals, schools, roads and other projects built under the private finance initiative has topped £200bn, documents published in the Budget showed – a total that would pay to run the National Health Service for two years.

The cash will be paid out over the next 25 years to cover the capital cost and services of the projects, with annual payments set to peak at just over £10bn a year in 2017.

The commitments, totalling £210bn, come as concerns are mounting that public services with big PFI projects may be at a disadvantage as the government seeks efficiency savings to help reduce the deficit.

PFI contracts usually include maintenance requirements that cannot be abandoned and must be paid for.

Although dangerous in the long term, the public sector tends to put off maintenance when expenditure is squeezed.

Treasury officials acknowledge that talks with PFI providers may be required to persuade them to offer more flexibility than the contracts stipulate.

The Budget report on UK infrastructure assumes the PFI will continue to provide finance for schools, hospitals and housing.

However, it warns that the massive demand for private capital to build energy, transport, waste and water projects – at £40bn to £50bn a year for the foreseeable future – means these “may compete for the same sources” of finance, at a time when the government plans to halve its own capital spending.

From: http://www.ft.com/cms/s/0/84618b94-383b-11df-8420-00144feabdc0.html

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