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Cost-saving claims for PFI are ‘based on biased evidence’

HELEN PUTTICK, Health Correspondent

April 04 2007

Treasury claims that private finance initiatives save money are based on flawed and biased evidence, according to a report by Scottish researchers.

Studies used by Westminster to support the controversial policy, where public buildings such as schools and hospitals are built by private firms and leased back to the state, were examined by a team at Edinburgh University.

Two of the documents cited by officials and drawn up by the National Audit Office (NAO) are based on interviews with managers of PFI projects, say the academics. Only one of the data sources compares PFI and public-funded schemes, and this, they claim, does not contrast like-for-like.

Professor Allyson Pollok, head of the Centre for International Public Health Policy at Edinburgh University and co-author of the research, said: "We have false data being used to reassure the public and being incorporated into the government's own guidance."

Private finance, or public private partnerships, have increasingly been used to replace outdated public sector buildings both north and south of the border - despite controversy about what they ultimately cost the taxpayer. A new £300m hospital is being built in central Scotland through such an initiative.

In a policy statement in 2003, the Treasury said research into completed PFI projects showed 88% came in on time or early, with no overruns on construction costs borne by the public purse. In contrast, they noted, earlier analysis of non-PFI projects found 70% were delivered late, and 73% ran over budget.

The same data has since been referred to by the government and others to defend PFI, according to the Edinburgh University researchers.

They set out to check five studies used to support such claims, and say in the Journal of Public Money and Management: "We show that the Treasury claims about the benefits of the PFI in relation to comparative performance on time and cost overruns are not supported by their data and, as a result, Treasury guidance is biased in favour of the policy."

One of the studies looked at the way costs rose during the course of planning and constructing PFI and state-funded buildings. However, the rise in the PFI schemes was measured from the point when a full business case had been drawn-up, while the rise in the state-funded schemes was measured from an earlier milestone, the outline business case stage, according to the Edinburgh University report.

Professor Pollok added: "With 450 PFI schemes, they only had a sample of 11 and only complete data on three. They got 39 public sector comparators at a time when there was almost no public sector building going on."

A Treasury spokeswoman said: "The independent National Audit Office, not the Treasury, reported on the effectiveness of PFI projects, and it is they who state that PFI gives greater certainty'. The Government remains committed to investing in public services and infrastructure to overcome a historic legacy of under-investment, and PFI will continue to be used to deliver a small but important part of this."