Private Finance Initiative (PFI) oversight is warranted, and the government must act on what it learns. Nevertheless, the CBI argues that private financing is critical in building new roads, hospitals, and schools.
The UK sorely needs to invest in addressing the country’s need for stronger infrastructure, to guarantee that we don’t lag behind our competitors. With the public budgets so constricted, most of the investment to maintain and construct infrastructure will need to come from private funding.
Building Strong Foundations: Financing UK Infrastructure, a new paper by the CBI, proposes a set of steps to improve infrastructure investment through efficient public-private partnerships.
Dr Neil Bentley, CBI deputy director-general, said: “A successful economy depends on high-quality economic and social infrastructure. The public’s need for excellent new schools, hospitals, and other facilities cannot be met without private financing, especially in light of the current situation of public finances.
“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 gives one of the best bangs for buck in terms of increased economic activity, so this is a chance to produce jobs, growth and build for the future.”
The Private Finance Initiative (PFI), according to the CBI, has already provided taxpayers with numerous advantages, including improved designs, risk sharing, and project costs that include maintenance. More than 700 PFI projects, including more than 120 healthcare initiatives, have been approved and financed in the recent decade.
Dr Bentley added: “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 employed when it gives best value for money.
“While PFI isn’t always the best option, when it has been properly implemented, it has resulted in significant improvements to the UK’s infrastructure.
“Businesses recognise that PFI use must evolve and that we need to discover new means of paying for our infrastructure. But governments must stand up for the role that private financing has to play and determine sooner rather than later how to use it to best effect.”
Measures the CBI is advocating for to improve infrastructure investment and ensure value for money include:
For example, schools, hospitals, and jails might all benefit from uniform design standards developed in consultation with the private sector.
•The Government should introduce legislation to increase local authority borrowing capabilities to enable them to accelerate Tax Increment Funding programmes.
Throughout the duration of the contract, services such as cleaning should be re-tendered to ensure that they are cost-effective.
•In order to successfully benchmark services, the Cabinet Office must create guidelines mandating contracting entities to give uniform data on service cost and quality.
With a five-year vision, the government should lay out a clear strategy for future infrastructure to give businesses and investors peace of mind.
•Planning changes must focus on removing delays and uncertainties.
•Contracting authorities should maintain risks which are more cost efficient being kept in-house. Economies of scale can save you a lot of money in the insurance and energy sectors, to name just two.
An easy-to-understand payment system should be implemented by the government in order to encourage service improvements.
•The Cabinet Office should employ lean procurement procedures and take away bureaucracy for private-public partnership projects to maximise savings, as well as putting out clear timelines at the commencement of each project.