PracticePeople In PracticeWhitehall told to demand PFI returns

Whitehall told to demand PFI returns

The House of Commons Public Accounts Committee has ordered government departments to demand a share of any windfall profits resulting from PFI contracts.

Fuelling the row over PFI, the call followed the disclosure that a refinancing operation at Fazakerley Prison on Merseyside increased the projected profit for shareholders without producing any benefit for the prison service.

The 600-prisoner jail was constructed by Fazakerley Prison Services Limited, originally owned by Group 4 and Tarmac, whose interest was later acquired by Carillion.

The contract gave the prison service no right to benefit from any refinancing and it was only able to secure Pounds 1m out of Pounds 10.7m from the new deal to cover the increased risk of a cancellation.

MPs on the committee said the prison service’s permission was required for the refinancing but it failed to use its bargaining position to secure better terms.

The report said: ‘Successful delivery of a PFI is never a one- sided matter. Success will come from the public sector and private sector working effectively together.

‘It is therefore unacceptable for 100% of refinancing benefits to remain with the private sector side.’

Links

Audit Commission weighs up PFI deals

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