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North West Breakfast 2010: Life after PFI
Public spending is in the spotlight. It must be cut, say many – it can’t be cut too severely, reply others, because the private sector isn’t strong enough to do the job currently. So what is to be done with the procurement of major projects?
We put together a top-class panel, including Stockport Council chief executive Eamonn Boylan, Harvest Housing boss Ian Perry and Andrew Screen, who’s just been headhunted by GVA Grimley to head a new national team in this field.
Our keynote speaker was Bill Enevoldson, just appointed to head public sector in the north for KPMG. So, with the private finance initiative (PFI) under fire, with the Labour government being widely accused of building up public debt through this off-balance sheet mechanism, what does the future hold?
Enevoldson said that despite having become politically unpopular, PFI remains the best way of delivering many projects. He named the £600m Greater Manchester waste deal as a PFI success and said that “PFI or another form of public/private partnership is the only way to deliver something like high-speed rail.” Perry agreed: “The procurement is expensive, but it does deliver great product in schools and hospitals.”
A focus on the big cities could be the right direction, Enevoldson said: “The next few years are going to be extremely difficult and the NWDA will have less to work with. Rather than give everyone a little less funding should be directed at the schemes that really matter and provide the best return. Greater Manchester and Merseyside are the region’s key economic drivers.”
What alternatives are on the table? Increased prudential borrowing is an option, and Screen said that he expects limits to be imposed on how much local authorities can borrow – a move Enevoldson said could be “hugely damaging” to smaller authorities.
Screen also talked of an infrastructure bank and the need to finds a new way to bring private money in, saying: “Private lenders just aren’t there at the moment and there needs to be a cost adjustment.”
How about asset-backed vehicles? Boylan said that values have fallen so low in non-prime locations that the public sector’s assets here aren’t worth enough to make it an option. He did say though that a lot of work has been done to explore tax increment financing and accelerated development zones.
Joint ventures are an option, especially further down the food chain. Perry said he’d just agreed a venture with a council where each party had put in land and cash to deliver housing, care facilities and associated stock over ten years – “for up to 500 houses, that can be done, but for larger schemes it’s harder”.
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