Treasury taskforce should be replaced by advisory group to be called UK Capital, says Sir Malcolm.
A REVIEW of the private finance initiative has recommended the creation of a body independent of the Treasury to advise contractors and government departments.

The review, carried out by Pearl Assurance chairman Sir Malcolm Bates, recommends that the body replace the PFI taskforce, which is to be wound down this summer.

Called UK Capital, the body would invest £50m-100m of public money a year into PFI deals. This would give the public sector more control over projects on which there were value-for-money fears.

Sir Malcolm, who recommended the existing Treasury PFI taskforce almost two years ago, believes UK Capital would be able to draw on the public and private sector for high-calibre staff.

Also, a body that does not have a predetermined lifespan would be more attractive to top-quality staff than one set up for a limited period. The Treasury taskforce struggled to attract the best staff, with chief executive Adrian Montague the exception.

Montague, whose contract runs out this summer, may return to the City when the taskforce comes to the end of its term. However, sources close to him say he is also considered a front-runner to head UK Capital. A body with a long-term future may tempt him to stick with a PFI role.

The plan for UK Capital has not received the full backing of the City, which is concerned that too much intervention in PFI schemes would be unwise.

Alan Milburn is a politician to his fingertips. He will think carefully about this radical suggestion

Industry Source

Industry sources say there is still a chance that PFI minister Alan Milburn may reject Sir Malcolm's recommendations and opt to extend the life of the taskforce. This would almost certainly lead to Montague's departure.

One said: "Alan Milburn is a politician to his fingertips. He will be thinking very carefully about adopting what is quite a radical suggestion from Bates." An announcement on the Bates review could be made next week.

Meanwhile, the Major Contractors Group has sent a strongly worded submission to a taskforce consultation on standard contract terms for PFI projects.

Bankers have already objected to a proposed model clause that says if the government terminates a contract, the amount paid to it on expiry should be a market rate – which in certain circumstances may be negligible.

Contractors say that, if this clause is introduced, it might become impossible to fund PFI projects.

The matter was also raised last week when the MCG met health minister John Denham to discuss problems on PFI hospital projects.