By Tash Shifrin
11 February 2010
Public sector organisations face a bill of more than £40bn in Private Finance Initiative charges over the lifetime of the next Parliament – as part of a £217bn total liability stretching over three decades.
The extent of the fixed costs associated with the PFI across the UK public sector emerged as the Ministry of Defence announced its choice of aircraft provider. Soteria – a consortium of private firms CHC, Thales, Sikorsky and the Royal Bank of Scotland – will provide a national search and rescue helicopter service under a £6bn, 25-year PFI contract.
Shadow defence secretary Liam Fox called on the government to put off the search and rescue deal until after the election. He said: ‘Given the government’s record on PFIs, and its performance on helicopter contracts especially, we will want, if elected, to look at the fine details of the contract.’
Last week, the Liberal Democrats attacked the cost of PFI deals in the NHS. Treasury figures show the 106 NHS PFI schemes signed by September last year have a total capital value of £11bn, but unitary charge payments over the next three decades amount to another £58bn.
Of this, £7.1bn is due over the course of the next Parliament in the five years from 2010/11 – a major fixed cost at a time when public sector spending is expected to be harshly squeezed.
But an analysis by Public Finance of PFI schemes across the public sector – with a total capital value of £55.2bn – shows future unitary charges mounting up to £217.5bn over the lifetime of the deals, with a £41.6bn bill over the next five years.
Edinburgh University PFI expert Mark Hellowell told PF that part of the unitary charge covered services such as facilities management.
But the cost of capital – making up an average of around 60% of the charge – was higher under PFI than through traditional procurement, he said.
‘For the government as a whole, there are these very high fixed costs – that’s less affordable now that tax income is drying up.’ This ‘reduces the wriggle room’ as the government cracks down on public spending, he added.
The impact would be worse for individual public bodies with PFI schemes, Hellowell said. ‘Anything up to 15% of your budget is going on the unitary charge. That’s a fixed cost. So if you have to make an efficiency saving, that is going to have to come out of the remaining 85% of your budget – which in the NHS is going to come out of services.’
11 February 2010
Public sector organisations face a bill of more than £40bn in Private Finance Initiative charges over the lifetime of the next Parliament – as part of a £217bn total liability stretching over three decades.
The extent of the fixed costs associated with the PFI across the UK public sector emerged as the Ministry of Defence announced its choice of aircraft provider. Soteria – a consortium of private firms CHC, Thales, Sikorsky and the Royal Bank of Scotland – will provide a national search and rescue helicopter service under a £6bn, 25-year PFI contract.
Shadow defence secretary Liam Fox called on the government to put off the search and rescue deal until after the election. He said: ‘Given the government’s record on PFIs, and its performance on helicopter contracts especially, we will want, if elected, to look at the fine details of the contract.’
Last week, the Liberal Democrats attacked the cost of PFI deals in the NHS. Treasury figures show the 106 NHS PFI schemes signed by September last year have a total capital value of £11bn, but unitary charge payments over the next three decades amount to another £58bn.
Of this, £7.1bn is due over the course of the next Parliament in the five years from 2010/11 – a major fixed cost at a time when public sector spending is expected to be harshly squeezed.
But an analysis by Public Finance of PFI schemes across the public sector – with a total capital value of £55.2bn – shows future unitary charges mounting up to £217.5bn over the lifetime of the deals, with a £41.6bn bill over the next five years.
Edinburgh University PFI expert Mark Hellowell told PF that part of the unitary charge covered services such as facilities management.
But the cost of capital – making up an average of around 60% of the charge – was higher under PFI than through traditional procurement, he said.
‘For the government as a whole, there are these very high fixed costs – that’s less affordable now that tax income is drying up.’ This ‘reduces the wriggle room’ as the government cracks down on public spending, he added.
The impact would be worse for individual public bodies with PFI schemes, Hellowell said. ‘Anything up to 15% of your budget is going on the unitary charge. That’s a fixed cost. So if you have to make an efficiency saving, that is going to have to come out of the remaining 85% of your budget – which in the NHS is going to come out of services.’
