Watchdog report: PFI contracts 'only option' for councils and health trusts

There was no evidence that PFI schemes offered better value for money, according to a report from the Public Accounts Committee, but in many cases they were the only way to fund projects.

However, the Government failed to use its leverage in the market to secure the best possible deal for taxpayers, the committee found.

Committee chairwoman Labour's Margaret Hodge said: "Local authorities and health trusts used PFI because there was no realistic alternative, not because it represented best value for money.

"The use of PFI and its alternatives should now be robustly evaluated.

"The Government should also do more to find out where and why PFI works best and capture the lessons.

"By bundling together large numbers of PFI projects, private sector investors may use the consequent economies of scale to drive up the value of their interests and generate bigger profits.

"We are concerned that the benefits arising from these economies of scale are not being shared by the taxpayer."

The committee's report focused on the use of PFI by the Department for Communities and Local Government to provide housing and the Department of Health to provide hospital support services.

The report said: "There is no clear evidence to conclude whether PFI has been demonstrably better or worse value for money for housing and hospitals than other procurement options.

The housing contracts have cost considerably more than originally planned and were, on average, two-and-a-half years late, the report said.