Pfi In Housing And Hospitals

The Department of Health and the Department for Communities and Local Government (the Departments) are responsible for sizeable portfolios of PFI projects covering hospitals and social housing. By April 2009 there were 76 operational PFI hospitals in England and over 13,000 homes had been built or refurbished through PFI. The letting of contracts and the responsibility for managing them is devolved to NHS Trusts and local authorities. The Departments are responsible for overseeing their PFI programmes and reporting to the public and Parliament on value for money. The Committee can find no clear and explicit justification and evaluation for the use of PFI in terms of its value for money. In many cases local authorities and Trusts chose the PFI route because the Departments offered no realistic funding alternative. Other concerns are central government's failure to use the market leverage that comes from overseeing multiple contracts, and the lack of robust central data to support effective programme management. It is clear that the implementation of PFI projects could be improved. Many PFI housing procurements have taken very much longer, and cost a great deal more, than originally planned. On hospitals, most are receiving the services expected at the point contracts were signed and are generally being well managed. There are, however, wide and unexplained variations in the cost of hospital support services, such as cleaning, catering and portering. Departments are not using their own buying power to leverage gains for the taxpayer.

The reports published as HC 631 (ISBN 9780215555922); HC 632 (9780215555939); HC 574 (9780215556042); HC 552 (9780215556066); HC 502 (9780215556165)

Lessons from the experience of using PFI can be applied to improve other forms of procurement and help Government achieve its aim of securing annual infrastructure delivery cost savings of £2 billion to £3 billion. To secure the best value for money from all types of procurement, the public sector needs to develop skills the NAO has identified. These are collecting better data to inform decision-making; ensuring projects have the right skills; establishing effective arrangements to test, challenge and, if necessary, stop projects; and using commercial awareness to obtain better deals. The case for using private finance in public procurement needs to be challenged more. Also, privately financed projects will often still be off balance-sheet which may continue to act as an incentive to use PFI. There has not been a systematic value for money evaluation of operational PFI projects by departments. So there is insufficient data to demonstrate whether the use of private finance has led to better or worse value for money than other forms of procurement. The Treasury and departments should identify alternative methods for delivering infrastructure and related facilities services to maximise value for money for government. The NAO welcomes the current plans of the Treasury and Cabinet Office to strengthen project assurance. The report highlights the need for independent challenge capable of stopping projects which do not give the prospect of value for money. This is particularly important as there is still a shortage of the skills needed to manage and oversee complex major projects.

Annually, the government commits significant expenditure to a type of public contracts which are known as Public-Private Partnerships (PPPs) or the Private Finance Initiative (PFI). These contracts bind the public purse for decades in sectors such as Health, Defence and Detention, and involve the assignment of a significant role to the private sector in the provision of public services. This book explores the controversial subject of the public accountability of these contracts, and the corresponding large sums of public money involved. It explains how public accountability works for PPPs and the PFI, and it argues that it should be provided as part of the Economic Constitution. Drawing comparative understandings from the UK and the USA constitutional legal traditions, the book investigates public accountability from the perspective of the Economic Constitution, focusing on three accountability criteria - legal, accounting and administrative. In doing so, it provides an analysis which informs both from the perspective of academic research and from that of legal and consulting practice.

The Treasury Committee concludes that Private Finance Initiative (PFI) funding for new infrastructure, such as schools and hospitals, does not provide taxpayers with good value for money and stricter criteria should be introduced to govern its use. Higher borrowing costs since the credit crisis mean that PFI is now an extremely inefficient method of financing projects. Poor investment decisions may continue to be encouraged across the public sector, however, because PFI allows Government departments and public bodies to make big capital investments without committing large sums up front. There is no convincing evidence that savings and efficiencies during the lifetime of PFI projects offset the higher cost of finance. The current Value for Money appraisal system may be biased to favour PFIs and there are problems with the way costs and benefits for such projects are currently calculated. Investment could be increased in the long run if government capital investment were used instead of PFI. Paying off a PFI debt of £1bn may cost taxpayers the same as paying off a direct government debt of £1.7bn. Recommendations include: the Treasury should consider scoring most PFIs in departmental budgets in the same way as direct capital expenditure; the Treasury should discuss with the OBR the treatment of PFI to ensure that PFI cannot be used to 'game' the fiscal rules; the Value for Money assessment process should be subjected to scrutiny by the NAO; the Treasury should review the way in which risk transfer is identified.

A distinctive new account of why markets focus on short-term goals, while government needs to concentrate on society's long-term interests.

Government spending on the NHS has increased by 70%, from £60 billion in 2000-01 to £102 billion in 2010-11., with around 40% spent on services provided by acute and foundation hospitals. There have been significant improvements in the performance of the NHS, particularly in those areas targeted by the Department of Health (the Department) such as hospital waiting times and outcomes for patients with cancer and coronary heart disease. But productivity has actually fallen over the last decade. The Office for National Statistics estimates that, since 2000, total NHS productivity fell by an average of 0.2% a year, and by an average of 1.4% a year in hospitals. The trend of falling productivity will need to be reversed if the NHS is to meet the Department's productivity challenge, to deliver up to £20 billion of efficiency savings a year, by 2014-15, without compromising services. The Payment by Results approach (a tariff for procedures) has driven some improvements, but it only covers 60% of hospital activity and there is substantial variation in hospital costs and activity. The tariff system could, though, prioritise price over quality. National pay contracts have not yet been used to manage staff performance effectively, and consultants' productivity has fallen at the same time as they have had significant pay rises. There are risks to the NHS being able to deliver up to £20 billion savings annually, for reinvestment in healthcare, alongside implementing a substantial agenda of reform. Productivity improvements will be key to delivering these savings.

There has been little analysis of the constitutional framework for management of the UK economy, either in constitutional law or regulatory studies. This is in contrast to many other countries where the concept of an 'economic constitution' is well established, as it is in the law of the European Union. Given the extensive role of the state in attempting to resolve recent financial crises in the UK and elsewhere in Europe, it is particularly important to develop such an analysis. This book sets out different meanings of an economic constitution, and applies them to key areas of economic management, including taxation and public borrowing, the management of public spending, (including the Spending Review), monetary policy, financial services regulation, industrial policy (including state shareholdings) and government contracting. It analyses the key institutions involved such as the Treasury and the Bank of England, also including a number of less well-known bodies such as the Office for Budget Responsibility. There is also coverage of the international context in which these institutions operate especially the European Union and the World Trade Organisation. It thus provides an account of the public law applying to economic management in the UK. This book also adopts a critical approach, assessing the degree to which there is coherence in the arrangements for economic management, the degree to which economic policy-making is constrained by constitutional norms, and the degree to which economic management is subject to deliberation and accountability through Parliament, the courts and other institutions.