The government will undertake a “fundamental reassessment” of the private finance initiative (PFI) to create an improved delivery model, chancellor George Osborne announced today.
The Treasury will lead the review that aims to create a new model that takes advantage of private sector expertise, but at a lower cost to the taxpayer.
The government is said to expect that the new model will be cheaper, will access a wider range of private sector financing sources and will strike a better balance of risk between the private and the public sectors.
The Treasury will also be looking to retain the benefits of PFI, including getting projects delivered to time and to budget, and giving the private sector “the right incentives to effectively manage risk”.
The review will create a model which:
- Is less expensive and uses private sector innovation to deliver services more cost effectively;
- Can access a wider range of financing sources, including encouraging a stronger role to be played by pension fund investment;
- Strikes a better balance between risk and reward to the private sector;
- Has greater flexibility to accommodate changing public service needs over time;
- Maintains the incentive on the private sector to deliver capital projects to time and to budget, and to take performance risk on the delivery of services;
- Delivers an accelerated and cheaper procurement process;
- Gives greater financial transparency at all levels of the project, so that the public sector is confident that it is getting what it paid for, and that the taxpayer is sure it is getting a fair deal now and over the longer term.