The Private Finance Initiative (PFI) is to be reformed, Chancellor George Osborne has announced in a written Ministerial Statement made on 15 November. The Treasury is to take the lead on a broad-based consultation exercise, starting with a call for evidence on 1 December, to "capture the lessons of the last 20 years of PFI." The Ministerial Statement concludes with an open invitation to private and public sector parties with "strong ideas" on how a future model should work to bring those ideas forward.
The review will focus on achieving projects at a lower cost to the taxpayer, and securing for the Government better value for its public sector investment. The guiding principles of the review will be "to create a model that:
- is less expensive, and that uses private sector innovation to deliver services more cost effectively;
- can access a wider range of financing sources, including encouraging a stronger role to be played by pension fund investment;
- strikes a better balance between risk and reward to the private sector;
- has greater flexibility to accommodate changing public service needs over time;
- maintains the incentive on the private sector to deliver capital projects to time and to budget and to take performance risk on the delivery of services;
- delivers an accelerated and cheaper procurement process; and
- gives greater financial transparency at all levels of the project so that the public sector is confident that it is getting what it paid for, and that the taxpayer is sure it is getting a fair deal now and over the longer term."
We will be monitoring the Treasury website for publication of the call for evidence document, and will issue a follow-up e-update on 1 December.
Click here to view the full Ministerial Statement.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.