18 July 2003
The government's attempt to defuse long-standing criticisms of the Private Finance Initiative by tackling some of its more obvious flaws has been greeted with suspicion by the public sector trade unions.
Chief Secretary to the Treasury Paul Boateng this week unveiled a revamp of ministers' favourite method of procuring public sector goods and services, announcing a range of measures intended to boost its ability to deliver value for money.
But Malcolm Wing, national secretary for Unison, told Public Finance the research underpinning the review was not objective. He insisted a fully independent inquiry into the PFI was still needed to establish whether it had any value.
'The Treasury's report succeeds in justifying present policy in its own terms. Its credibility is undermined by its own lack of objectivity,' Wing said. 'They don't want an independent review because they don't have confidence in their case.'
Sir Bill Morris, outgoing T&G general secretary, was cautious in his response. 'If this signals a change in policy, then it's a welcome change.'
Ministers are keen to show that the PFI will be used only where it can deliver value for money and is not driven by ideology. PFI: meeting the investment challenge emphasises that savings 'should not be achieved at the expense of staff terms and conditions'.
It admits that in some areas the policy has failed: the PFI will no longer be used for IT projects, following a string of high-profile disasters. It has also been abandoned for schemes costing less than £20m because the associated procurement costs make them too expensive to be worthwhile.
But the PFI will be used to fund projects across a range of new areas, such as urban regeneration, social housing and waste management.
The public sector comparator, which has been lambasted by critics as open to manipulation, will be reformed to make it more robust.
The package also includes setting up a register of accredited firms and advisers to encourage the use of standard contracts and cut the multimillion pound consultancy fees that can be run up during negotiations.
According to CIPFA, the reforms herald significant new flexibility for local authorities, which procure most of the projects under £20m that will no longer happen through the PFI.
This decision, together with the introduction of the prudential borrowing regime, will give councils more choice about how to finance projects such as libraries, leisure centres and street lighting.
Maureen Wellen, the institute's assistant director for local government finance and policy, said: 'Decisions about financing options will be made on a more level field. It would seem that for all but the largest schemes the Treasury is suggesting this level field will result in options other than the PFI.'
PFjul2003
