By Max Clarke
The Government is right to look closely at how the Private Finance Initiative (PFI) is used and must act on the lessons learned.
But it should also recognise that private finance must play a vital role in delivering new roads, hospitals and schools, the Confederation of British Industry's (CBI) said today (Thursday).
The UK badly needs to invest in meeting the country’s need for improved infrastructure, to ensure that we don’t fall behind our competitors. With the public finances so constrained, much of the investment to maintain and build infrastructure will need to come from private finance.
In a new report, Building Strong Foundations: Financing UK Infrastructure, the CBI puts forward a package of measures to boost infrastructure investment through effective public-private partnerships.
“A successful economy depends on high-quality economic and social infrastructure. Given the current state of the public finances, private finance must be an option if the public is to continue to access quality new schools, hospitals and other infrastructure at an affordable price," Dr Neil Bentley, CBI Deputy Director-General, said.
“We want the Government to publish a clear, long-term pipeline of projects so that investors can have the confidence to put their money in the UK. Infrastructure spending also offers one of the biggest bangs for buck in terms of additional economic activity, so this is a chance to generate jobs, growth and build for the future.”
The CBI’s report highlights the benefits that the Private Finance Initiative (PFI) has already delivered for taxpayers, through better designs, sharing risk and including maintenance in the overall cost of the project. In the last decade more than 700 PFI projects have been both approved and financially backed, including more than 120 healthcare initiatives.
“Thanks to the use of private finance and expertise, hundreds of hospitals, schools and homes have been built, with the vast majority delivered on time and on budget. But let’s be clear, private finance should only be used when it offers best value for money," Dr Bentley added.
“PFI mustn’t be viewed as the solution on every occasion, but when it has been used effectively it has delivered huge improvements in the UK's infrastructure.
“Businesses understand that the use of PFI must evolve and that we need to develop new ways to pay for our infrastructure. But ministers must stand up for the role that private finance has to play and decide sooner rather than later how to use it to best effect.”
Measures the CBI is calling for to boost infrastructure investment and ensure value for money include:
· The Government should consult with industry to develop a range of standardised designs for infrastructure, including schools, hospitals and prisons.
· The Government should introduce legislation to extend local authority borrowing powers to enable them to accelerate Tax Increment Funding schemes.
· Facilities management services, such as cleaning, should be re-tendered regularly throughout the contract to ensure they deliver value for money.
· The Cabinet Office needs to produce guidelines requiring contracting authorities to provide standardised data on service cost and quality to allow services to be benchmarked effectively.
· The Government should set out a clear plan for future infrastructure to allow businesses and investors to invest with confidence, with a five-year outlook.
· Planning reforms must focus on removing delays and uncertainties.
· Contracting authorities should retain risks which are more cost effective being kept in-house. Insurance and energy services are examples of areas where economies of scale can lead to significant savings.
· The Government should introduce a clear and simple payment mechanism to incentivise continual improvements in services.
· The Cabinet Office should use lean procurement techniques and strip out bureaucracy for private-public partnership projects to maximise savings, as well as setting out clear timescales at the outset of each project.
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