04 September 1998
Paymaster general Geoffrey Robinson has confirmed that he will not cut the funding earmarked by non-departmental public bodies for payments under a PFI scheme.
The decision opens up the possibility of bodies such as inward investment agencies and the National Audit Office carrying out their own PFIs.
The news comes as the Department for the Environment, Transport and the Regions gave the go-ahead for 15 local authority PFI deals, including a library, a leisure centre, eight schools and a fire station.
And Falkirk council has just signed a £70m PFI deal that will rebuild five of its eight secondary schools. It is only the second schools' PFI, though it may soon be followed by a deal in Leeds. The 25-year contract in Falkirk is the first to include a number of schools in a single deal – the model which both the public and private sectors believe is the only way that the costs of the PFI can be afforded.
With private finance clearly taking off in local government, the Treasury's PFI task force has turned to the public bodies that operate at arm's length from ministers. The Bates review of the PFI, which the government ordered weeks after coming into office, recommended that departments assure private finance providers that the money will be there to meet NDPBs' obligations for the duration of the contract.
This week's statement from the Treasury task force fulfils that recommendation.
'HM Treasury explicitly recognises that commitments due under PFI contracts entered into by NDPBs funded by voted monies, represent inescapable expenditure for the NDPB concerned,' the Treasury statement said. 'The expected payments due under such contracts can be considered to be effectively ring-fenced within the NDPB's budget.
'If at any time in the future the government is obliged to find savings in public expenditure this should not affect the provision set aside for PFI contracts by the NDPBs.'
Mr Robinson added: 'It is terrific to see the Treasury task force once again practising what it preaches. Public-Private Partnerships are all about negotiating deals that are good for both sides, and the government is keen to exploit the potential for value for money through the use of a wide spectrum of partnerships that combine public and private sector skills.'
The move was welcomed by the Confederation of British Industry's private finance specialist Amanda McIntyre. She added: 'Previously, non-departmental public bodies have been reluctant to make full use of the PFI for fear that they would not have the budgets in the long term to pay their PFI bills. With funding guarantees they should now have the confidence to go ahead.'
The task force also published a best practice guide for civil servants on how to appoint and manage PFI advisers in the most cost-effective way.
The task force has dropped its original plan to accredit PFI advisers after taking soundings from its lawyers. It added that accreditation would be unwieldy and would place an unnecessary bureaucratic burden on the public sector.
Accreditation would help cut the cost of the PFI, Ms McIntyre said. 'High bidding costs continue to threaten private sector interest in the PFI. Most of the public sector – individual local councils, NHS trusts, Whitehall agencies – may not do enough PFI business to build up in-house expertise.' She added: 'Equipping them to make better use of external advisers would save a lot of wasted time and money.
We are glad to see the government guidance stressing that the cheapest advice is unlikely to give best value.'
A guide to the PFI has been produced on CD-Rom* and includes the task force's technical and policy guidance and private finance case studies. The CD itself is a Public-Private Partnership – the fourth the task force has entered into.'With a growing number of PFI projects signed or close to signature, it is vital that the Treasury task force disseminates best practice as widely as possible,' Mr Robinson said.
*from Digital Networks Ltd on 0181 567 0178
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