06 July 2007
Opponents of Britain's Private Finance Initiative ignore one rather vital fact – it works. Not only does it do what it's meant to do, it does it so well that other countries are queuing up to learn from the experience
The Private Finance Initiative is a UK success story, despite the claims of Dave Prentis in Public Finance ('PFI in the sky', June 22—28). The rapid modernisation of our public services over the past 15 years would not have been possible without it. It has delivered projects on time and to budget. And it has helped to transform service delivery in areas ranging from improved learning environments in schools to better housing in urban regeneration projects.
By encouraging long-term planning, the PFI ensures that our new and refurbished hospitals, schools and other municipal buildings should be as fit for purpose at the end of 25-year contracts as they were at the start.
What is more, its projects are achieving value for money and transferring risk to the private sector. Private sector contractors, not the public purse, pick up the bill if things go wrong. And it is meeting wider social and environmental goals, driving innovation and focusing on user satisfaction.
International demand for British PFI expertise would never be in the robust state it is if the model wasn't producing results. European Union member states and countries as far flung as Japan, Australia and South Africa are on the PFI trail.
But this success should not lead to complacency from business or from the public sector. A report on the PFI published by the CBI just a few weeks ago recognises both how far we've come and how much further we need to go. As society changes, so the initiative should evolve to meet people's needs. And this is happening.
The Local Improvement Finance Trust model is being used to redesign and build GP practices and community hospitals. Although similar to the PFI, Lift involves greater collaboration between public and private partners in the design and project planning stages.
The CBI knows that new models such as this are needed to build in more flexibility to deal with future uncertainties in public demand and changing political priorities. We want the government to spell out the benefits of the PFI and of new partnership models to the public. It needs to show how these fit in with its vision of modern public services.
Market forces, properly managed, can be a great force for good in the delivery of public services. They drive efficiency and focus providers on delivering what people want. But this requires better commissioning and public procurement skills, with more interaction between sectors to share expertise. Competitive supply markets can function only if they are managed by professional staff, who have the right rewards and incentives to succeed.
There must also be transparency and rigour in the tendering process, with procurements driven by outcomes, not processes. Equally, partnerships need leadership at a senior level, robust governance mechanisms and excellent relations between the parties.
Staff also need to be fully involved if partnerships are to succeed. Our research shows that people transferring between sectors often feel liberated by their move. That there hasn't been a single complaint under the two-tier code shows that private sector employers must be doing something right.
Some might have hoped that new Prime Minister Gordon Brown would reverse a decade of his own public infrastructure investment decisions on entering Number 10. But a week and a half into his premiership and there is no sign of this. Support for change from Public Accounts Committee chair Edward Leigh shouldn't be relied on either. Despite the claims of Dave Prentis, Leigh did not describe PFI companies as the 'unacceptable face of capitalism'. This criticism was levelled at the refinancing of one PFI hospital deal, not at the industry.
In fact, the overall effect of this refinancing was assessed by the NHS hospital trust in question, Norfolk & Norwich, as representing value for money. The deal was good for the NHS trust, the taxpayer and the contractors, who were rewarded for the risk they took.
The refinancing gains, which were shared with the trust, were only possible in the first place because the contractor had successfully delivered the project. As a result of this and of falls in interest rates between the signing of the deal and the opening of the facility, it was able to obtain better financing terms.
Also, when analysing the PFI, we must never forget what went before — buildings delivered late and over-budget; the public told to like or lump the services offered; crumbling facades and murky public finances.
Rational debate is needed if the success of the PFI is to be continued and challenges overcome. So-called 'thorough reviews' of the PFI undertaken by ideological opponents of it are unlikely to advance the cause of human knowledge. What is needed is open and honest dialogue free of preconceptions.
So let's move on from yesterday's arguments and see how we can make the PFI and other innovative partnership models work even better in the future.
Dr Neil Bentley is CBI director of public services
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