NAO looks at PFI pros and cons

A briefing on the rationale, benefits and costs of the private finance initiative and its successor, PF2, said the Department of Health and Social Care had used PFI more than any other (127 projects and an aggregate unitary charge of £13bn in 2016/17). Trust payments to their private sector partner range from 5.6% to 20.1% of turnover.

It said private finance had advantages – being off-balance sheet in government accounts and allowing public bodies to invest when capital funding is limited. The NAO did not give a view on value for money, but said: ‘Our work on PFI hospitals found no evidence of operational efficiency: the costs of services in the samples we analysed were similar.’

A recent study showed costs such as cleaning were higher in PFI hospitals, though the Department says costs may not be comparable due to risk transfer and different cleaning standards.

Savings can be hard to achieve given the structure of deals, the NAO added.

The public sector has more equity in PF2 – it was believed this would reduce repayments and lower risk, attracting pension fund investment. However, the auditors said the proportion of debt to equity was similar to that in PFI and pension funds had yet to invest.