Headlines: July 17th, 2003

The Public Finance Initiative will continue to fund a wide range of public sector capital projects, but there will be changes resulting from new Treasury guidance. There will be expansion in the areas of social housing, urban regeneration and waste. The potential for new methods of financing projects, for example, through “framework funding” for small PFI schemes will be explored. Conventional procurement methods in preference to PFI will be used in areas such as IT and for small value projects. In the longer term PFI procurements are likely to decline.Among the reforms being introduced will be a change in the value for money assessment which will block attempts to secure benefits at the expense of employee terms and conditions.

To date the Government has closed 563 PFI deals with a total valueof over 35 billion pounds. Recent years have seen the steady growth of the market in PFI with projects in a wide range of sectors such as health, education, defence and housing, including 34 hospitals and 239 new or refurbished schools that are already up and running. 89 per cent of projects were delivered on time or early and the costs of signed deals only changed where the public sector’s requirements changed. This year investment through PFI is expected to be around 4.6 billion pounds.

A study by Pricewaterhouse Coopers on the rates of return bid by private sector participants in the PFI market showed that the cost of financing PFI deals has fallen steadily as PFI has developed.