Disasters fail to shake Treasury resolve on PFI

The Treasury has announced an investigation into the effectiveness of the private finance initiative but insists it remains its favoured model of public/private partnership (PPP).

At the annual conference of the Local Government Association's procurement arm 4ps, the Treasury's private finance head Gordon McKechnie said the analysis of the PFI would be published in the autumn.

The results will be eagerly awaited by councils anxious to secure new or improved finance mechanisms for projects such as new public buildings.

Mr McKechnie said: "We have had some PFI disasters… but there has been a misconception that PFI is a form of procurement that is dying. That is not the case: the government remains confident of what PFI can bring to the public sector."

PFI was put under the spotlight after Parliament's liaison committee called for MPs to have more scrutiny powers over contracts.

Meanwhile, the Scottish Government last month snubbed PFI, instead using public coffers to fund a £842m hospital in Glasgow. The governing Scottish National Party has long claimed PFI is costly and flawed.

James Stewart, chief executive at Partnerships UK, told the conference that other PPP models would become more prominent. "Smaller PFI projects, in the region of £20m, in isolation remain hard work," he said. "We need programmes, not single subjects. We are going to see a lot more joint ventures in the future."

While PFI has been the government's favoured approach since its introduction in 1992, there are alternative models.

Non-profit distributing organisations are designed to make a profit which is re-invested in services or business growth rather than distributed to shareholders. Others include public sector-led investments, like Crossrail.

Also talking at the event was LGA chief executive Paul Coen, who called for more joint enterprise between the public, private and voluntary sectors.