04.12.12
New private finance initiatives to be launched
Chancellor George Osborne is to announce reform of Private Finance Initiatives (PFI) to make them more public and less private.
The move will be introduced alongside his Autumn Statement, due tomorrow.
Concern and criticism over the long-term liabilities of PFI deals have focused on the huge repayments that they entail. The new initiatives, Private Finance 2 (PF2) will see the public sector take stakes of up to 49% in individual private finance projects, with likely typical stakes of 20%.
A director will be appointed to the boards of each project and every project will have to publish its financial performance every year. The Treasury will also publish a running total of taxpayers’ cumulative liabilities.
An attempt will be made to speed up the procurement process for the deals and smaller, simpler contracts will be used. The contracts will no longer include soft facilities management, or contracts for catering, cleaning, security and IT. The debt proportion of funding for PF2 will fall to 80%.
Additionally, Osborne will renegotiate existing PFI deals to deliver £2.5bn of savings over the lifetime of the contracts.
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