25 April 2003
Non-profit-distributing public interest companies have a 'potentially important role' to play in public service delivery, says a new report from the Institute for Public Policy Research. But it warns that the government should use them selectively and with caution, rather than as a 'policy fad'.
The report, In the public interest? Assessing the potential of public interest companies, welcomes the use of the Pic model for Network Rail, and for foundation hospitals and trusts. The creation of Network Rail was 'an innovative and welcome decision', and foundation hospitals could 'bring real benefits', said its author, IPPR research fellow Paul Maltby.
Pics do not usually have shareholders, are legally independent from the state, and deliver a public service. The Health and Social Care Bill proposes a form of public interest company to run foundation hospitals, and the Department of Trade and Industry is currently consulting on a new legal model for Pics.
The IPPR argues that the companies should be considered as an alternative to centralised state control or privatisation for some public services. But the choice must be based on outcomes, not 'ideological presumptions', it argues.
'They are certainly not a panacea for the public services,' said Maltby. For example, becoming a Pic 'would not solve the underlying problems facing British Energy'. The government also needs to address the complex governance issues involved.
Public interest companies are likely to be most suitable for relatively low-risk public sector services, argues the institute, which comes down in favour of a prudential borrowing framework for taxpayer-funded Pics, such as foundation hospitals.
PFapr2003
