Local officials 'need PFI training'

15-05-2007

Local officials 'need PFI training'
Local officials do not have the commercial awareness to negotiate deals under private finance initiatives (PFI), MPs have warned today.

A report from the public accounts committee (PAC) has highlighted a number of areas it believes the Treasury needs to work on to ensure the success of PFI schemes.

PFI projects are financed by a mixture of bank loans and investor funds and in 2002 the government introduced arrangements so that the private sector could make gains from the public sector.

Some new hospitals have been built using PFI; under this scheme a private company builds the hospital and then receives 'rent' payments from the NHS each year for approximately 30 years. The payments include the costs of providing maintenance over the lifetime of the contract.

In the NHS plan of July 2000 the government pledged a vast hospital building programme and much of this has been achieved through PFI. New schools have also been built through the initiative.

Today's PAC report argues that PFI projects are not as successful as they could be due to a lack of commercial awareness from local officials.

It says that "all staff undertaking refinancing negotiations should undergo suitable training to equip them for this role".

The report also warns that proceeds from PFI have not been as large as predicted by the Office of Government Commerce.

Commenting on the findings, Edward Leigh, chairman of the PAC, said: "Local public sector officials taking forward PFI projects such as hospitals or schools are often painfully lacking in commercial experience.

"Proceeds gained by the public sector from PFI debt refinancing under the voluntary code for the sharing of gains are currently well short of expectations. It might be that the code as it stands does not encourage smaller refinancings. A sliding scale of sharing of gains might encourage more refinancings with benefits to both public and private sectors."

Mr Leigh concluded: "There is no requirement for the gains made by investors through selling on their shares in PFI projects to be shared with the government. The Treasury must keep the working of the PFI equity market under close scrutiny to make sure the public interest is not being compromised."

Vince Cable, Liberal Democrat spokesman on the Treasury, backed the PAC's calls for more training of people involved with PFI deals "to get the best deal for the taxpayer".

"Even at the second attempt, the government is failing to achieve value for money. The proceeds from refinancing are way below the government's own forecasts. This shows just how much taxpayers are suffering because of a lack of negotiating ability."

Commenting on the report, a spokesperson for the Treasury said taxpayers have gained "significant benefits" from PFI financings.

"The Treasury only supports refinancings where they offer value for money," he added.

"Although there is no current evidence that the secondary equity market is working ineffectively we continue to monitor developments in the market, both with other departments and with key investors."



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