“It’s all very well calling for a Keynesian programme of public works to kickstart the economy,” wrote Rachel Sylvester in The Times on Tuesday, “but JM Keynes did not have to deal with the PFI.”
She was referring to figures we published last week showing that £10bn of PFI projects were on hold. In fact, there is a wealth of evidence that rather than accelerating public spending as the chancellor Alistair Darling promised, spending on public sector projects is in reverse. That’s not to say it’s all bad news for contractors, as Morgan Sindall’s healthy profit showed this week (page 19). These results, like those for Balfour Beatty, are proof that public investment can shelter the industry from the worst of the downturn. But it still needs to be made more efficient and effective. Here are a few suggestions for how this can be done …
The government should be involved in rescuing PFI contracts that are falling behind owing to a lack of financing. European Investment Bank money is already on its way to Partnerships for Schools schemes that are in trouble, and local authorities’ pension funds may also be made available. This extra money might make a difference here and there, but they’re hardly a universal solution. What we really need is for the government to underwrite PFI loans until the banking system recovers sufficiently to be unhooked from the life-support machine. And once we do get out of this crisis we also need to ask whether we still trust the PFI model.
We also have to be sure we don’t spend the money on half-baked schemes just to get projects on site. But we should direct more investment at repair and maintenance, refurbishment and small projects that sidesteps the bureaucratic labyrinth of public procurement and planning and give work to SMEs.
And what about a little intelligent prioritisation? Why put investment into transport projects that (contrary to previous promises) won’t start until 2011 when it could go to the Learning and Skills Council? As we report on page 30, the council has been inundated with bids by colleges that are ready to start on site. And finally, how about helping councils that are finding the same problem with their primary schools? Already the £7bn programme to upgrade them has missed one of its first deadlines because so many schools are, not surprisingly, sticking their hands up. These things are not exactly quantum physics, but together they add up to a procurement strategy that Keynes would have approved of – and will also save countless livelihoods.
We need the government to underwrite PFI loans until the banking system can be unhooked from the life-support machine
In case anybody wants to go down the pub and argue that the glass is, in fact, half full, here’s a quick briefing note. First, let’s raise a cheer for the Shard – Mace signed the contract this week and work starts next month. We’ve also got the Homes and Communities Agency up and spending. It’s about to announce the first of a number of groundbreaking deals that could build thousands of new homes. Then there are construction prospects around the world to consider – according to our exclusive Davis Langdon forecasts there are still many bright spots, particularly in the Middle East and China. Oh, and in case you haven’t won the argument yet, bring in Cabe’s success in persuading Rafael Viñoly to rethink his outlandish plans for Battersea power station; that should sway the neutrals …
Denise Chevin, editor