The Private Finance Initiative is under attack and may no longer be the only game in town. But, in local government, councils should still be able to use this funding method when it is truly the most efficient route
Today’s Treasury Select Committee report may not be the last word on the Private Finance Initiative, but we must hope it spells the end of centrally-mandated PFI for local authorities. Decisions about how to procure and finance schools, houses and local roads are not best made by SW1. They must be made locally if we are to maximise the value of public and private investment in infrastructure.
If the conclusions of the report on PFI were taken in isolation, one could be forgiven for assuming that the damning critique represents its death knell. Scroll down to the recommendations, however, and we see that PFI is far from gone. Modified, reformed and arguably improved, but far from gone.
While PFI detractors may rail against this, it represents a measured and reasonable response to this specific issue. It would be foolish to ignore the positive features of PFI, and this is certainly an instance where we should be wary of throwing the baby out with the bath water.
It’s been clear for a number of years that PFI has a number of benefits, but it’s equally clear that it’s not always the optimal financing route. As the report rightly acknowledges, the VfM assessments designed by the Treasury to assess whether PFI should be used have been unfairly biased against other financing options.
In the past this has meant that central government has given local authorities no choice but to use PFI. Labour’s flagship Building Schools for the Future programme, for instance, attracted substantial criticism for its implicit preference for PFI, and damaged relations between central and local government as a result.
This is something that needs to change. Local authorities must be free to choose the financing options they deem to be the most appropriate. A number of authorities have embraced PFI and other public private partnerships, using them to deliver infrastructure efficiently and effectively.
For others, there are a host of reasons why PFI just isn’t right. The common denominator is that it’s councils themselves who know which method is best for them.
The solution must be a more diverse and equal playing field of financing options. Through our current Capital Futures research we aim to set out a range of financing investment choices for local authorities. This includes PFI, but goes further, examining the potential for bond issues, Local Asset Backed Vehicles, Tax Increment Financing and others.
Crucially, central government must recognise its role in supporting the development of these approaches and supporting councils where necessary. Ultimately though, Whitehall needs to leave choices about which method to use to the local authorities who know their communities best.
Tom Symons is senior researcher at the New Local Government Network
