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Regardless of the election, private financing is vital

Shadow chancellor George Osborne’s suggestion that the private finance initiative is “flawed and must be replaced” is baffling. Because whatever administration that follows next Spring’s General Election, the massive shortfall in public finances will be top of the list of problems to solve.

To therefore write off the PFI as part of the on-going solution to public infrastructure and service provision is therefore clearly ridiculous. Osborne suggests that his team is hard at work finding new public sector funding models that will provide better value for taxpayers cash and that will more effectively and transparently transfer risk from the public sector.

Which is a great aspiration, of course, and one that every taxpayer would commend − demand − from the government. And it is why there have been so many investigations, reports and recommendations by the National Audit Office (NAO) and select committees over the years into the 600 plus schemes now on the go. What Osborne seems to have missed is the fact that these investigations have increasingly been giving PFI the thumbs up.

In short Osborne fails to recognise the huge evolution that PFI has been through since New Labour inherited and expanded the policy initiated by John Major’s Conservative administration and he fails to recognise the massive amounts of investment that has flowed into the public sector as a result.

“Osborne fails to recognise the huge evolution that PFI has been through since New Labour inherited and expanded the policy initiated by John Major’s Conservative administration.”

So to suggest that the current model is still “heads the contractor wins, tails the taxpayer loses” is plainly nonsense. While certainly there have been a number of schemes which failed to deliver value for public money over the years, the NAO latest findings suggest that we are now seeing quite the opposite.

For example, the Building Schools for the Future programme is helping local authorities to plan and procure strategically and so spend cash better. Big deals such as the Highways Agency’s M25 widening continue to learn from past experiences with terms now included that allow the Agency to claw back huge amounts of benefit from post-construction refinancing.

And local authorities, which now outsource a range of service such highway maintenance, transport, street lighting and waste, are increasingly satisfied with the outcomes of the deals.

“Rather than dismantling a process that isn’t broken, we should continue to encourage innovation by demanding clients and creative private sector partners.”

This is underlined by Amey chief executive Mel Ewell in NCE this week, who states that bringing projects through “using private sector skills and private sector finance” will be vital regardless of the General Election outcome.

Fortunately Osborne does still accept that private sector involvement will be vital to the delivery of public assets in the future. But to suggest that with a wave of his new Tory wand he will discover “new ways to leverage private sector investment” as he puts it is doubtful.

So rather than dismantling a process that isn’t broken, we should continue to encourage innovation by demanding clients and creative private sector partners − partnerships that will continue to push down the cost of public procurement and delivery.

  • Antony Oliver is NCE’s editor

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