AVON AND SOMERSET POLICE AUTHORITY
Valley Road, Portishead, Bristol BS20 8JJ
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Enquiries to: John Smith Telephone (01275) 816377 Facsimile (01275) 816388
Your Ref: Our Ref: FOI00216
Via email:
16 September 2011
Dear Mr Orr
RE: FREEDOM OF INFORMATION REQUEST
I am writing to confirm that Avon and Somerset Police Authority has now completed its search for the information which you requested on 19 August 2011.
BBC 19 August 2011
PFI projects 'poor value for money', say MPs.
PFI projects will generate an estimated £2.8bn in capital spending this year
The Private Finance Initiative (PFI) used by successive governments
to pay for new schools and hospitals is poor value for money, MPs
have said.
The Treasury select committee said PFI was no more efficient than
other forms of borrowing and it was "illusory" that it shielded the
taxpayer from risk.
In a critical report, the cross-party Treasury select committee
said the long-term expense of PFI deals - where the private sector
shoulders the upfront cost and is typically repaid by the taxpayer
over a 30-year period - were now much higher than more conventional
forms of borrowing.
Due to the financing costs involved, it said paying off a £1bn debt
incurred through PFI cost the taxpayer equivalent to a direct
government debt of £1.7bn.
PFI had become the default option for many public bodies as initial
procurement costs were comparatively low, the MPs said, but too
often the size of the financial commitments undertaken and their
impact on future budgets was not taken into account at the time.
"We believe that a financial model that routinely finds in favour
of the PFI route, after the significant increases in finance costs
in the wake of the financial crisis is unlikely to be fundamentally
sound," the report concluded.
"We do not believe that PFI can be relied upon to provide good
value for money without substantial reform."
The report found little evidence that PFI-funded buildings were of
higher quality or more innovative in their design than those
procured by other means or that contractors were incentivised to
maintain finished buildings to a higher standard.
"PFI means getting something now and paying later," Andrew Tyrie,
the Tory MP who chairs the committee, said.
"Any Whitehall department could be excused for becoming addicted to
that. We cannot carry on as were are, expecting the next generation
of taxpayers to pick up the tab. PFI should only be used where we
can show clear benefits for the taxpayer."
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Q1a. In the light of the above critical report, will ASPA now pause
& review the Business Case for the massive PFI-based borrowing for
the accommodation programme, to ensure that it remains best value
(in a post credit crunch world where borrowing costs have risen
sharply)?
Answer: A value for money assessment was conducted week commencing 8 August 2011. The PFI delivery route continues to demonstrate value for money.
Q1b. When was the Business Case PFI-based borrowing for the
accommodation programme last reviewed? Was that Business Case
baselined against other forms of borrowing (as up to 70% public
funding savings are reported as possible)
Answer: The borrowing is under constant review by the project team, its financial advisors, Treasurer and Director of Finance. A final business case has been submitted to the Home Office and Treasury, who will independently determine whether the solution is affordable and best value.
Q2. In the light of the above critical report, will ASPA review the
Business Case for this massive PFI-based borrowing for the
accommodation programme, to ensure that in an era of austerity and
cuts that the revenue payments for the PFI debt (capital &
interest) are both:
a) Affordable and
b) Do not adversely impact on Police frontline funding?
Answer: Please refer to answer to Q1b.
Q3a. Please disclose medium term financial planning budget
estimates of the annual cost of repaying the PFI loan (capital &
interest) for the accommodation programme for 2012/13, 2013/14,
2014/15, 2015/16?
Q3b. How much is forecast/budgeted to be borrowed under PFI for the
accommodation programme? What is the forecast/budgeted PFI loan
term? How much is forecast/budgeted to be paid in total for the PFI
loan by the end of that repayment term (adjusted for inflation)?
Answer: It is uncertain as to what is meant by the "PFI Loan". The Police Authority have directly incurred costs in purchasing land for the PFI buildings to be developed on, and has also incurred costs associated with the PFI programme in order to manage the project, and fulfil the requirements of central government. The PFI, once approved and in operation, will result in the successful private sector partner undertaking private finance for the costs of the buildings development, which will be charged to the Authority over the life of the contract, and paid for by a central government grant, known as PFI Credits. Therefore the only loan borrowing we have factored into our Medium Term Financial Plan (Revenue) and the Capital Programme (Capital) relates to those costs directly attributable to the Authority. Our projections at this time on these costs are £8m of capital on land purchases and associated costs and £4.1m (being £3.7m capital and £0.4m revenue) on project costs. These are substantially funded from borrowing, but as we do not borrow specific amounts for specific projects (merely borrow in total to fund the overall capital programme) we can only disclose the average rate paid on all of our borrowing, which is regularly reported to the Finance Committee of the Police Authority. As at the 31st July 2011 the average rate on our borrowing was 3.76%.
Q4. Can ASPA provide an up to date assurance to support continuing
with an old-style PFI accommodation programme when the above
critical report explicitly states "PFI should only be used where we
can show clear benefits for the taxpayer"?
Answer: The business case articulates the business benefits and value delivered by the PFI solution. It compares the PFI option to ‘do nothing’ and development under other funding solutions. New build, PFI procurement offers the preferred solution.
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Yours sincerely,
Freedom of Information Officer