Brown: Borrowing off the balance sheet

Ministers must do more to ensure private finance initiative projects provide value for money, a think tank report has concluded.

A study released by the Institute for Public Policy Research on Wednesday found that the chancellor's policies are still biased against conventional procurement assessments.

Gordon Brown's determination to keep private sector borrowing off his balance sheets has meant comparisons have not been made with taxpayer funded investment in major capital projects, the report said.

"It's quite difficult to make out what would have happened if we had gone down the conventional route," author Tim Gosling said.

"We should have produced a more mixed approach, then we could have benchmarked the one against the other."

Over £40 billion has been spent in PFI building projects such as new schools and London Underground upgrades.

While 57 per cent, mostly for tube lines, is recorded as borrowing on departmental balance sheets, critics fear many of the contracts for the remaining 43 per cent have been chosen because the money can be hidden in ministry accounts.

The IPPR report claims that this may be a greater incentive for ministers in the short term than providing good value for taxpayers in the long run.

It recommends that more information be made available on PFI, as has been made mandatory in the NHS, in which more than nine out of 10 new hospitals are built using the scheme.

Transparency

Gosling said that recent Treasury policies on providing efficient procurement should be toughened up by creating a single spending budget on one balance sheet containing conventional investment and public private partnerships (PPPs).

"The government has made some welcome progress in reforming the PFI and PPPs but it needs to go further," he said.

"Introducing a single capital budget for both PFI and conventional procurement would help to make sure that departments chose PFI for value for money rather than balance sheet reasons.

"Similarly the government should take steps to make PPPs more accountable to the public by making all PPPs sign up to the same openness standards as the NHS."

Liberal Democrat Treasury spokesman Vince Cable backed the call for more accountability

"It is important that PFI is not approached in an evangelical and ideological way either in terms of critical support or doctrinal opposition," he said.

"Each PFI project needs to be looked at carefully to measure whether it is value for money. There is now abundant experience to show that many PFI projects that have been undertaken have not been value for money.

"There must be greater transparency within the system and much of the detail which is in the public interest is often hidden behind commercial secrecy.

"We would welcome the introduction of a single capital budget as there is evidence that the government still chooses PFI as a way to remove investment from balance sheets rather than secure value for money."