PFI contracts 'costing the taxpayer an arm and a leg'

Spending watchdogs discovered hundreds of pounds are being charged for fitting an electric socket or a new lock under the terms of the Private Finance Initiative.

The National Audit Office said another £6million a year is squandered in administration fees which are "largely unjustified".

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It also revealed that £180million was paid by public bodies in a single year to PFI contractors to make changes to their contracts.

The NAO found that one school was charged £320 to fit an electric socket, although the same job on another contract cost ten times less at just £30.81.

One hospital was charged £486.54 for fitting a lock. At another hospital the cost to the taxpayer for the same job was £15.09. Charges even varied within the same institution.

At one hospital, a new key could be £4 or almost £50.

Under PFI, private firms agree to build, run and maintain public projects or services in exchange for payment over the life of the contract.

Edward Leigh, chairman of the Commons Public Accounts Committee, said: "Changes during a 25 to 30-year PFI contract are inevitable but they should not be costing the taxpayer an arm and a leg as they are."

There are now 500 PFI projects worth a total of £44billion.

Under the terms of the contracts, schools, hospitals, prisons and courts often have no choice about who services boilers, changes light bulbs or carries out maintenance.

Mr Leigh added: "Public sector contract managers must be a lot more streetwise. The public sector has allowed itself to be taken for a ride."

At one building, managers wanted to remove smoking shelters. It should have been a one-off cost of £750. But the PFI contractor decided to charge £2,600 a year for the change on the grounds that more cigarette butts would be spread around the site, adding to the cost of cleaning.

The report said public authorities must use their right to renegotiate terms of the contracts at five-yearly intervals and should insist on putting all large changes out to competitive tender.

Tory Treasury spokesman Philip Hammond said: "Public support for PFI projects depends on proper management of projects and demonstrating value for money for the taxpayer.

"The Government is manifestly failing to achieve either of these things."