Belfast Telegraph

Joint civic projects with private sector will end up costing the taxpayer £7bn

By Rebecca Black

Taxpayers will have paid out more than £7bn for Stormont's current 39 privately-funded projects by 2030, it has been revealed.

The Northern Ireland Executive has been slammed for having a "slapdash approach to its borrowing commitments" after it emerged it had no way to ensure value for money on joint projects with the private sector.

There are currently 39 private finance initiative (PFI) contracts in Northern Ireland, where private companies are used to deliver major projects.

But a report by the Northern Ireland Audit Office has found that these contracts will take almost a quarter-of-a-billion pounds a year out of Stormont departments' budgets until 2030.

The public/private partnerships help spread the cost of major projects – such as the Invest NI headquarters in Belfast city centre – over long periods of time.

Invest NI's offices, which house up to 579 staff, opened in November 2005. The contractor is responsible for maintenance until the PFI contract ends in 2030.

In June 2011, a total saving of 3% (£28,500) in the annual cost of running the service was agreed.

However, this project is one of the few in Northern Ireland where efficiencies have been sought.

While other UK regions have begun assessing the potential for savings, there is no similar programme here.

The Audit Office has urged Assembly Members to review the efficiency of its PFI contracts.

Auditor and comptroller general Kieran Donnelly said the use of PFI and the reinvestment and reform initiative – which allows borrowing of up to £200m a year from the Treasury – helped deliver improvements in public services and infrastructure.

Entering these PFI partnerships with the private sector, as well as borrowing from the Treasury, helps Stormont avoid large one-off bills and can defer the cost until many years in the future.

However, since the PFI method was adopted in 1992 it has built up significant spending commitments for future budgets, estimated at £7.3bn and averaging £245m a year until 2030.

Contracts may run for 30 years, but departments' budgets are set over terms of up to four years.

But as PFI repayments have to be kept up for decades even if budgets are slashed, there is a real risk that publicly-funded Government services will suffer.

The audit office said the cost of PFI was not collected centrally and information was not given directly to the Assembly or committees of MLAs which scrutinise departments.

Its report highlighted the need to test the cost and quality of services to ensure value for money was achieved during the life of the PFI contract. Mr Donnelly added: "This needs to be started, with regular reporting of outcomes and savings to the Assembly."

The report recommended that departments engage with PFI investors, sub-contractors and lenders to improve transparency in older contracts through voluntary codes of conduct.

In June, Westminster published its code of conduct for public/private partnerships in a bid to reduce costs.

The report said: "We recommend that OFMDFM should consider the applicability of this code of conduct and promote the voluntary use of this or a similar code by departments and the private sector companies involved in PFI."

Northern Ireland Conservatives spokesman Mark Brotherston described the findings of the report as "worrying".

"The Executive has a history of wasting huge amounts of money and while other UK regions are examining PFIs closely to save money, there is no such programme here," he said.

PFI firms should sign code: auditor 

BACKGROUND

Private finance initiative (PFI) contracts are a way for Government to spread costs and fund major projects without large budget-busting one-off bills. Private contractors build and manage properties, such as the Invest NI headquarters, for up to 30 years for an annual fee to Government. However, the Audit Office has voiced concern that the cost of PFIs is not collected centrally and given directly to the Assembly and its committees for scrutiny. It has recommended an efficiency review programme in an attempt to maximise potential savings.

Belfast Telegraph

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