By Richard Johnstone | 25 July 2011
A leading Private Finance Initiative expert has cast doubt on whether the government will achieve its plans to cut £1.5bn from the cost of the projects.
Nick Maltby, a partner at law firm Bircham Dyson Bell, said that the savings programme, announced on July 19 by commercial secretary to the Treasury Lord Sassoon, ‘failed to convince’.Sassoon said that three trial projects examining the value for money of PFI contracts showed that the savings could be made.
The pilots, at the Queen’s Hospital in Romford, two Ministry of Defence sites at Corsham and the Welbeck Defence Sixth Form College, revealed that annual payments could be cut by 5%, the commercial secretary said.
The Efficiency and Reform Group in the Cabinet Office will now lead a programme to make savings across 495 operational PFI projects in England. It will also publish updated advice for all PFI contract holders on how this can be achieved.
The Treasury said savings have been made through a combination of changes, including reducing wasteful energy consumption, subletting or mothballing surplus building space, and reviewing service requirements such as window cleaning and frequency of decoration.
However, Maltby, who has handled more than £730m of PFI projects and is the UK country correspondent of the European public-private partnerships law review, said that the results of the pilots, which started in February, are ‘measures that don’t contain anything material’.
He said: ‘I just don’t see how we can save £1.5bn from more effective management of contracts, the efficient use of space and a review of soft services requirements and there is no mention of the time period in which the savings should be made, which could be as much as 30 years.
‘Anyone involved in the PFI could have told those looking for the savings that they would be hard to find and would be akin to squeezing blood from a stone. Whether they will achieve these savings remains to be seen.’
He called on the government to be more vigilant in putting in place the recommendations of the many National Audit Office reports on the PFI, few of which, he argued, ever seem to be implemented. ‘The PFI industry would welcome positive change but I just don’t think anyone in government understands the detail enough to implement the changes.’
Sassoon said that he is ‘confident’ the savings target will be reached. Launching the savings guidance, he said: ‘We have identified every opportunity to find savings – tackling wasteful practice and gold plating in PFI contracts. The potential savings will vary from contract to contract, but the results are promising and we will support the wider public sector to find savings in complex contracts.’
