Consultation paper published as housebuilder reopens assault on 'illogical' PFI credits
The government has caved in to pressure to change the private finance initiative and make it easier for councils to form partnerships with private companies.

The move came amid renewed criticism from the private sector over the way PFI is funded.

A consultation paper on PFI was launched last week by housing minister Lord Rooker. He is looking input on how to amend the way in which councils delegate housing management services.

The paper proposes amendments to section 27 of the 1985 Housing Act. The changes will allow successful PFI bidders to subcontract some work. Lord Rooker said: "Clearing away unnecessary restrictions will make it easier for [councils] to go into partnership with the private sector."

Paul Langford, assistant director of housing at Leeds council, said: "It will help, but there are a number of crucial things that they are hiding from, such as the provision of subsidies."

Graham Moody, managing director of Graham Moody Associates, advises a number of the eight PFI pathfinders. He welcomed the consultation paper's proposals, but warned: "The important thing is that it strikes the right balance between allowing tenants their rights and councils to renew housing.

"I'd expect it to be generally welcomed and hope that tenants' organisations look at it and see the merits of it. It's a good start – but now for the subsidy regime."

Last week, councils and bidders upset with the housing PFI regime sent a letter of complaint to the housing minister (HT 1 August, page 14). Now, a prominent private sector bidder has lambasted the government's efforts to fund PFI.

Paul Bloomfield, finance director of housebuilder Gleeson, said: "It is amazing the way PFI [funding] credits overhang projects." Gleeson is bidding for a number of housing PFI contracts from councils in Leeds, Manchester and north-east Derbyshire. Bloomfield said: "On the Manchester scheme, 30-40% of the PFI credit is payable in 30 years' time. To have it applied in such a way is downright illogical and councils are left to make up the shortfall."

On the consultation paper, he said: "It is annoying to find legal stumbling blocks that have always been there, but just weren't mentioned initially. It has pushed the delivery path out and is very frustrating."

The consultation ends on 27 September. The government hopes to have the amendments before parliament before the end of the year.