Group claims new models would be more transparent and better value for money
A new report by a group of infrastructure investors has urged the chancellor to develop new models of public-private partnerships.
Major social infrastructure projects like new hospitals and acute care schemes have not been allowed to leverage private finance since 2018, when then-chancellor Philip Hammond abolished PFI and PF2 contracts.
The controversial model, which was introduced by Conservative prime minister John Major in the 1990s and expanded under Tony Blair, was scrapped in the wake of the collapse of Carillion. The contractor had been building two hospitals, in Liverpool and Birmingham, under the PFI initiative at the time of its demise.
Under these models, private firms took on the risk of delivering projects in exchange for payments from government over several decades – which the Office for Budget Responsibility, the budget watchdog, described as a “source of significant fiscal risk to government” at the time they were pulled.
But the Association of Infrastructure Investors in Public Private Partnerships (AIIP), which is chaired by former Labour defence secretary in the Brown government, John Hutton, now Lord Hutton, has now said ministers should consider the model in the upcoming autumn Budget.
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It called on the government to update rules to once again allow social infrastructure projects to bring in private finance.
Ministers already announced in July’s 10-year health plan that partnerships could be developed for neighbourhood health centres. They have not said whether this could be extended to hospital rebuilds but work to explore broader use of PPPs has been announced.
The AIIP said new models of public-private partnerships could unlock a wall of £1tn of investment in British infrastructure.
The report made a series of recommendations which it said would improve transparency, reduce complexity and deliver value for money for the taxpayer. It also pointed to models in countries like Australia and New Zealand that the government could draw from.
The AIIP pointed to a National Audit Office (NAO) report which found that public-private partnerships were “usually delivered on-time and on-budget”. However, the same NAO report also noted research by the Organisation for Economic Co‑operation and Development which “found no evidence of higher quality infrastructure being delivered in advanced OECD economies by using private finance, as against public procurement”.
In a separate report, examining PFI contracts as they approach their end, the NAO found that four out of nine surveyed authorities that took ownership of PFI assets at the expiry of their contracts were not satisfied with the asset’s condition.
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