A nasty piece of work: Privatising job centres costs taxpayers £13bn
PFI contract soars £11bn over estimate
Privatising the management of hundreds of job centres has cost taxpayers £11 billion more than ministers promised, we can reveal.
The Department of Work and Pensions (DWP) sold hundreds of offices to a private consortium in 1998 – then leased them back in a 20-year deal.
At the time it was claimed the PFI deal, one of the first of hundreds signed by the Labour Government, would cost £2bn and save the public purse £500 million but the contract ends today and the final bill has soared to £13bn.
The £2bn figure given out by the UK Government in 1998 covered the cost of providing the buildings but did include huge fees and service charges paid to the private consortium then known as Trillium.
A string of big changes to the contract, including billions of pounds worth of building alteration, sent the final bill soaring with critics arguing the taxpayer has been stung.
The true cost of the deal can be revealed as the DWP has come under sustained criticism for how cuts to Britain’s benefits bill have affected some of the country’s most vulnerable.
Medical assessments meant to strip claimants of disability benefits were branded inhumane while job centre closures meant people, including disabled claimants, were forced to travel miles to prove they were available for work and protect their benefits.
The DWP last year confirmed it would close 21 of its 119 offices in Scotland, including eight of Glasgow’s 16 job centres, resulting in longer journeys for claimants.
Yesterday, the SNP called for a Westminster probe into the deal while Charles Law, industrial officer with the PCS Union, said: “Our view was the estate was grossly undervalued when it was sold in 1998 and certainly now, with the rise in property prices, it has been an absolute gift to Trillium.
“In terms of the costs, that was always kept tightly under wraps but the impression on the ground was they were charging a lot for the most straightforward of tasks, like changing a light bulb.
“It was a rip off.” Trillium, bought
700 DWP buildings at an upfront cost of £250m in 1998, even though the Government’s own advisers had valued them at between £316m and £361m.
The deal, according to the National Audit Office at the time, would save the taxpayer £500m over the next 20 years.
The DWP was then guaranteed the tenancy in as many of the buildings as it wanted to use in exchange for an annual payment to Trillium which covered rent, rates, cleaning, maintenance, catering and security.
In 2003, the PFI deal was expanded when the consortium, now known as Telereal Trillium, paid £140m for another 1100 offices, mainly job centres. However, we can reveal, that between December 1998 and December last year, a total of £12.026bn was paid out for charges including rent, maintenance, cleaning and security.
Separately, a further £1.127bn was paid when the DWP asked for significant alterations to the offices it rented. And the taxpayer also got hit for £125m for when the DWP wanted to vacate offices ahead of the contracted date.
The DWP says the significant hike in what was eventually paid out reflects the big projects commissioned that were not envisaged at the start of the PFI deal in 1998, such as a programme of expansion of its offices and services in the wake of the 2009 financial crash.
Scores of PFI deals signed in the late nineties are due to come to an end in the coming years and it is feared similar hidden costs will emerge in other projects.
The job centre closure programme in Glasgow resulted in the Easterhouse branch closing in February. The closest centre is three miles away in Shettleston, which for people from Easterhouse attending compulsory appointments is two buses away at a cost of at least £4.50.
A DWP spokesman said: “We are now merging job centres across the country in a programme that will save taxpayers £135m a year for the next 10 years.”
A spokeswoman for Telereal Trillium said: “The National Audit Office has conducted two reviews of the contract during its lifetime, both of which were positive.”