26 October 2001
A review is under way of the so-called 'green book', which sets the standards against which PPP schemes must be measured, including the crucial value-for-money test.
Smith, speaking at an Office of Government Commerce conference on October 23, refused to pre-empt the findings of the review, which are expected to be published shortly. But he indicated that any changes would be designed to make it easier for public bodies to strike deals with the private sector.
'We are absolutely committed effectively and dramatically to accelerate overall levels of investment,' he said. 'You have to have the tools that reflect the underlying economics.'
The green book guidelines state that PPP projects can go ahead only if efficiency gains will counterbalance the cheaper costs of public sector borrowing.
Factors such as time delays, which Smith said had historically caused difficulties for the public sector, are not taken into account. Cost overruns, another area of public sector weakness according to Smith, are assumed to be 12% but many in the private sector argue the figure is much higher. These assumptions now seem likely to be adjusted.
The chief secretary also sought to allay fears of a two-tier workforce developing, promising that the government would promote genuine partnerships between 'responsible management and the staff they employ'. And he called on delegates to accept the potential benefits of private sector involvement in public services.
'We must recognise the contribution the powerful discipline of the market can make,' he added.
Peter Ryan, head of the OGC's private finance unit, went further, suggesting that PPPs were here to stay. 'There are actually few real challenges to the principle,' he said. 'In a very real sense this process is now largely independent of the party political process in this country.'
Meanwhile, the Treasury select committee is to conduct an inquiry into the OGC to examine whether it has been meeting its brief – securing £1bn in efficiency savings – since being set up by the government 18 months ago. It will be the first time the OGC has been scrutinised by Parliament.
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