Taxpayers' millions are being 'squandered' under Labour's building deals, MPs warn

Millions of pounds of taxpayers' cash is being squandered under Labour's flagship scheme for building new schools and hospitals, MPs warned today.

The Commons' Public Accounts Committee said it was costing almost £200million a year to make changes to projects funded under the controversial Private Finance Initiative.

The cross-party group singled out the payment of £6million a year in 'unjustified' administration fees as a cause for concern.

In total, an astonishing £180million was paid by public bodies in a single year to PFI contractors to make changes to their contracts.

The committee said schools, hospitals and police forces were 'not doing a good job' managing contracts worth tens of millions of pounds.

It carried out an investigation into PFI after a report by the National Audit Office found hundreds of pounds were being charged for simple tasks such as fitting a new lock.

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

There are more than 500 PFI projects worth a total of £57billion. Future payments for the buildings will amount to another £181billion.

But schools and hospitals often have no choice about who carries out maintenance.

Only 27 per cent of changes to contracts which cost more than £100,000 are put out to competition.

It means there is no opportunity to get better value for money in the vast majority of changes. 

Edward Leigh, Tory chairman of the Public Accounts Committee, said: 'Many contract managers do not have enough commercial expertise and the management of the contract is frequently not sufficiently resourced.'

The Public Accounts Committee also called for the removal of management fees after it emerged that separate ' go-between' companies cost an estimated £6million a year.

Conservative MP Richard Bacon, a member of the PAC, said: 'PFI schools and hospitals looking to make changes to their services or assets are being fleeced for so-called management fees.

'The fees rarely have any relation to the work involved and are often levied for spurious reasons. This is exactly the kind of behaviour that makes people cynical about PFI projects.'

Matthew Sinclair, policy analyst at the TaxPayers' Alliance pressure group, said ministers had a 'lamentable record of failure' over PFI.