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Government urged to buy into private finance schemes

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PRIVATELY FINANCED infrastructure projects could give better value for public money if the Government bought stakes in the schemes, a leading investment banker told MPs on Tuesday.

Taking an equity stake would allow the public sector to have a greater say in the running of PFI schemes and help improve management after contracts are signed, Barclays Capital managing director Chris Elliott told the House of Commons Treasury select committee.

Elliott said that stakes should be held by Partnerships UK, the semi- public body which is being set up by the Government to replace the Treasury's Private Finance Task Force. Elliott is a member of the steering committee set up by the Treasury to define PUK's role as the Government's PFI trouble- shooter.

He told MPs that when the public sector hands over all responsibility for construction and operation of infrastructure for 25 to 30 years, it often loses some control over the final product. With PUK as a shareholder, he said, it would be able to develop a closer partnership between the public and private investors and improve value.

'PUK is attempting to make the public sector buyer a much more efficient purchaser of services,' he said. 'The problem at the moment is that the public sector is not involved in a project after financial close.'

In response, MPs on the committee expressed fears that there could be a conflict of interest if the public sector was negotiating private finance deals with project companies in which it held shares.

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