Privatised Taskforce will not have bank status

22 Jul 99
The government has diluted its plans to establish a state-funded bank to invest in Private Finance Initiative projects amid criticisms that such a body would face conflicts of interest.

23 July 1999

Announcing its response to Sir Malcolm Bates' second review into PFI on July 22, the Treasury confirmed the new successor to the Treasury Taskforce will be a privatised 'project manager' and not a bank. It will help design and negotiate PFI projects and finance their bidding costs, but will only rarely take equity stakes in the schemes.

The outcome is seen as a defeat for Adrian Montague, the head of the Taskforce. Montague has been leading a charm offensive to try to convince bankers and the Confederation of British Industry that a state-funded bank could act as a spur to PFI.

But opponents have argued that a bank would be unfair competition to the private sector and would lead to conflicts of interest. It is thought the Chief Secretary to the Treasury, Alan Milburn, over-ruled Montague's plans, and the Taskforce head will have no role in the new body.

Despite the watering-down, there was still opposition to the announcement. Howard Flight MP, shadow economic secretary to the Treasury, called it a 'woolly compromise' with no long-term future.

The Bates findings were announced at the same time as a report by Peter Gershon into Whitehall procurement. Gershon, managing director of GEC-Marconi Electronic Systems, recommended establishing a central agency, the Office of Government Commerce, to co-ordinate all government non-defence procurement.


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