By Richard Johnstone | 16 October 2013
The government has set out details of the investment regulations for the reformed Private Finance Initiative, including the terms under which the Treasury will provide cash for capital projects.
Chief Secretary to the Treasury Danny Alexander today confirmed the government would invest in joint venture companies, alongside the private sector, to build schools and hospitals under the PF2 programme.
The government will become a minority shareholder in the special purpose vehicles that construct, fund and operate public infrastructure, to ensure ‘a more collaborative approach to improving project performance and managing risk’, he said.
A PF2 equity unit will be established in the Treasury to undertake due diligence in possible projects, and the government will then invest on the same terms as the private sector.
The Treasury will also appoint a director to each PF2 venture, and private investors will be required to disclose more information than under the PFI rules.
The reforms are intended to address some of the problems with the PFI, which Alexander said ‘seemed to privatise the profit and socialise the risk, with schools, hospitals and government buildings locked into poor value contracts’.
As a shareholder, the public sector will have a stronger voice in the management of the PF2 project company and receive a share of the financial returns, he added.
‘We’ve consulted extensively to make sure we get a workable model that services both the public and private sector as it should.
‘This is a fundamental reassessment of the old PFI and it will provide better value for the taxpayer, better public services, and a better infrastructure.’
As expected, the Department for Education’s Priority Schools Building Programme is the first scheme to get the go-ahead to agree PF2 deals.
