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<p>The vast majority of PFI projects were signed under the last Labour government
– 620, or 86% of all PFI projects in the UK. Since coming to office in 2010, this
Government has reformed the approach so that now, PF2 contracts deliver better value
for money for the taxpayer.</p><p> </p><p>We have also improved the VfM we get from
existing PFI contracts, and this will deliver over £2 billion in efficiencies over
the remaining life of the contracts.</p><p> </p><p>The Treasury Green Book is clear
that, to compare the costs and benefits that occur at different times between different
projects, a discount rate must be applied to the cashflows. This is standard practice
in all economic appraisals as it provides a Net Present Cost for the different projects,
which enables a proper comparison of the costs and benefits occurring at different
times on a consistent basis.</p><p> </p><p>The NAO report’s finding that PF2 costs
are around 40 per cent higher than similar projects financed by government borrowing
is based on undiscounted cashflows and has not followed the Green Book guidance. It
is not, therefore, an appropriate comparison.</p><p> </p>
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