18 January 2011
The Department of Health has failed to renegotiate Private Finance Initiative contracts to secure a share of efficiency savings for the public, the Public Accounts Committee has found.
In a report on the use of the PFI in procuring hospitals and social housing, the PAC complained that it was unable to find any ‘clear and explicit justification and evaluation of the use of PFI in terms of its value for money’. But it noted that Whitehall departments had little choice but to use this route under Labour.
The MPs found that although specialist investment funds had begun to bundle hospital PFI contracts together to exploit economies of scale, the DoH had not asked for any share of these savings.
They noted: ‘The Department of Health is not using its own buying power to leverage gains for the taxpayer.’
The committee dismissed the department’s case that it was difficult to ask the private sector to share gains when the public sector did not share losses.
‘In some hospital projects, the investors are receiving returns of ten times their initial investment,’ the report said, adding that the DoH had accepted only ‘when pressed’ that renegotiation could be possible.
The committee urged the Treasury to find ways to help all Whitehall departments to secure better value for money from their PFI programmes.
Committee chair Margaret Hodge said: ‘We are very concerned that the Department of Health has not approached the major investors and contractors to negotiate a share in these efficiency gains and economies of scale.
‘Departments should exploit the commercial weight and buying power that comes from letting substantial contracts.’
The DoH also did not know whether PFI services provided more cheaply to some hospitals than others represented better value or worse quality. It had only sporadic performance data because it could not compel health trusts to provide it. In addition, half of all health trusts either had no one managing their PFI contract full-time, or used someone who spent less than one day a week on this.
A DoH spokesman said: ‘This government has been clear about the need for the NHS make every penny count so that efficiencies can be reinvested into frontline care.
‘Today’s report makes a number of recommendations for government, and we will study these closely. The focus must now be on driving through efficiency gains and savings at the many PFI schemes now operational.’
The MPs examined 76 operational PFI hospital contracts, worth £6bn.
It also looked at 25 contracts let by the Department for Communities and Local Government. The contracts, worth £2.8bn, were to provide 13,000 homes. The committee found that many PFI housing contracts had taken much longer and cost more than originally planned.
The DCLG told the committee that it had used the PFI mainly for large projects in areas of high deprivation rather than for straightforward refurbishments. It employed 11 people to oversee PFI projects and obtained performance data from local authorities.
