As I said, and as MPs now say, PFI is dead

Last month I wrote that the British government had killed off its public-private partnerships programme. Today’s report from a committee of MPs confirms that – arguably the most important point in the report, though not one chosen as the ‘top line’ by the few mainstream media who’ve reported it (FT report here for instance).

The Treasury Committee, which is independent of government, was examining changes to the private finance initiative, the brand name for PPP infrastructure projects and the contractual framework used by successive British governments to procure them. The revised framework, called PF2, was published by ministers at the end of 2012 after a long and fraught period of inquiry and evidence gathering. But not much has actually been done with it.

“Some of the projects that the Government initially planned to procure using PF2 have either scaled back their use of the approach or have abandoned it altogether,” the Treasury Committee’s report today says. Well, quite; and there weren’t many projects initially planned for PF2 in the first place.  Apart from the Priority Schools Building Programme and a couple of hospitals, there were plans to deliver capital investment in the defence estate through private finance (which, come to think of it, I was briefed about in early 2012).

The hospital plans have survived. The school building has been scaled back massively: only £700 million is being delivered with private finance, instead of £1.75 billion as planned. And the defence plans will be delivered with public funding, the Financial Times reported last year (it’s notable how much of the policy U-turns aren’t announced publicly by government but get leaked instead).

The MPs’ report queries the mechanics of PF2. Some of their concerns are reasonable – for instance, the fact that PF2 debt still isn’t recorded in public sector net debt does create an incentive to use it and keep statistics of government debt down. On the other hand, their quibbles about the ‘control total’, a ceiling beyond which PFI/2 spending liabilities can’t rise, and public sector equity returns being at risk, look misplaced to me. Having a spending cap shouldn’t result in rushed, sloppy project appraisal if that project appraisal model is sound in the first place; that’s where the problem lies. And of course public sector equity is at risk; risk transfer is the whole point of PPP!

But to me, these are relatively minor issues. Because what difference does it make how good or bad PF2 is if it doesn’t get used to actually build projects? Government departments have abandoned PF2 and show no sign of wanting to use it in future. Until they do, it – and this report – are dead letters.


About René Lavanchy

You can contact me at rene dot lavanchy at googlemail dot com.
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One Response to As I said, and as MPs now say, PFI is dead

  1. It is indeed extraordinary that the UK media have almost without exception continued to either under-report or wholly ignore the extensive waste and failures of PFI projects. PFI can be seen as a demonstration that UK governance is no longer fit-for-purpose; this is an inter-Governments, all-Party and Civil Service failure of truly epic proportions. There are other taxpayer-funded public policy tawdry failures along the way – like Help to Buy and Mortgage rescue – but they pale into insignificance against the scale of the PFI debacle. Why are the UK media so resolutely inattentive on this?

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