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Public spending efficiency needs private sector support

Amongst all the political uncertainty at the moment, one thing is pretty much guaranteed − a raft of public spending austerity is just around the corner.

Perhaps sooner than we think. Perhaps in areas that were previously thought safe. The purchase of London Underground upgrade contractor Tube Lines by Transport for London (TfL) and cancellation of the controversial public private partnership (PPP) is a worrying public spending milestone.

As the end of a major Gordon Brown inspired investment vehicle it could also be an ominous taste of what is to come. It could be a pointer towards future public sector policy which makes this relatively small development on London’s Tube very important to everyone living outside the capital.

Because while there is absolutely no doubt that the decision to pay £310M to wrestle control away from the private sector was hugely politically motivated, it does raise some big questions about how public clients manage future infrastructure investments.

“A raft of public spending austerity is just around the corner, and perhaps sooner than we think”

Not least because if a client like TfL is prepared to invest hundreds of millions of pounds to buy themselves out of long term commitments with the private sector rather than investing in the relationship, we really could all be in trouble.

It is clear that under Labour the public sector has been allowed to get too big and needs to be slimmed. But simply removing “expensive” private sector expertise is not the long term solution. TfL maintains that handing £310M to Tube Lines shareholders was done to drive better value into the Tube.

It also maintains that, having taken Metronet, the other original PPP contractor, back in-house two years ago, London Underground has the skills to manage the Tube Lines contract.

Well the jury’s still very much out on that one and besides, the Tube Lines contract is a much more complex affair. Whether or not the public sector can retain the necessary management skills is yet to be seen. Fundamentally, as the PPP Arbiter pointed out last week, TfL has a massive hole in its budget.

“To stay within its spending constraints TfL has to de-scope its upgrades, maintenance and renewals across the network”

To stay within its spending constraints it has to de-scope its upgrades, maintenance and renewals across the network. Spending £310M tearing up a contract that it failed to manage properly is surely throwing good (public) money after bad.

NCE has talked a lot about “delivering more for less” and ensuring that every single pound of public cash is invested effectively.

At the heart of this will be the public sector working closely and constructively withits private sector partners. Unless clients embrace meaningful relationships with the private sector we risk seeing this mantra translated into simply “delivering less”.

  • Antony Oliver is NCE’s editor

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