Scots public sector urged to renegotiate PFI deals

27 Mar 15

Scotland’s public bodies should be proactive in seeking to review and renegotiate Public Finance Initiative deals that no longer meet changed market conditions or public needs, top PFI consultant Alan Jessop told the CIPFA conference in Clydebank.

Though political unpopularity has in recent years seen PFI-type deals give way in Scotland to alternative structures, such as the Non Profit Distributing Model, Scotland still has upwards of 80 PFIs on capital projects worth more than £5bn.

South of the border, the UK Treasury is urging public authorities to review their PFI commitments, particularly where repayment is based on fixed inflators that no longer reflect economic reality. A code of conduct seeks to make negotiations more co-operative.

The way forward for Scottish bodies, Jessop said, was to be proactive in seeking early renegotiation, even if contracts did not provide for it, and to benchmark or market test terms against best practice and changed market conditions.  Early repayment to cut interest costs was another option, which had been used in cases like the Skye Bridge.

Jessop agreed that private finance was likely to resist, but suggested that both the fear of default and the continued need of the public sector for infrastructure investment could make the finance houses more amenable to compromise.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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