MPs slate HMRC’s £3.9bn offshore PFI deal

Published 09th Apr 2010

HM Revenue and Customs has wasted taxpayers’ money by ineffectively running its 20-year PFI property management deal with offshore firm Mapeley, MPs have said today.

The department has lacked the “commercial skills or business acumen” to properly manage its relationship with Mapeley after signing the deal in 2001, according to a Commons Public Accounts Committee report.

It said HMRC had badly managed risks associated with the private finance initiative, in which it transferred 60% of its properties to Mapeley STEPS Contractor Limited in a bid to save £1.2bn by 2021.

The report also said that striking a deal with an offshore firm had been “highly damaging” to HMRC’s reputation.

The contract with Mapeley was supposed to help HMRC reduce the number of buildings it occupied in a bid to save money. It was originally expected to cost £3.3bn but is now expected to run over budget by almost £600m to £3.9bn during its 20-year term.

“HM Revenue and Customs’ Estate Private Finance deal: Eight Years On” says that despite £1.2bn of possible savings being identified through vacating offices, that figure had fallen to £900m.

The report says: “While the department got a good price for the contract it has not managed the contract well.

“Mapeley was a new company and had put in a low bid based on speculative returns from increases in property values, with minimal operating profits.

“The department should have recognised the importance of tracking Mapeley’s financial position as, early in the contract, Mapeley sought financial assistance from the Department to deal with serious cash flow problems.

HMRC plans to close 130 offices during 2010-11. A spokesperson for HMRC said: “HMRC’s programme to make sure that the department has the right number of people, with the right skills, in the right places began in November 2006 and the decisions announced were made after an exhaustive regional review which ended in December 2008.

“By bringing staff together in larger teams and closing smaller offices HMRC will be able to deliver a better service to customers while delivering better value for money.”

It expects to save £230m in running costs by 2011-12.

Source: ' 'Property Week' '

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