Companies reaffirm need for private finance after leading think tank casts doubt on value of PFI.
Contractors and consultants this week defended the private finance initiative after an attack from a leading UK think tank.

A report by the left-leaning Institute of Public Policy Research said the government should sometimes use different forms of procurement, and criticised some PFI schemes in the education and healthcare sectors.

The publication of the report coincides with the announcement that nine hospital projects have been put on hold while a pilot scheme is assessed. This scheme involves ancillary staff remaining as NHS employees rather than being transferred to PFI consortiums.

The IPPR report claimed that savings in hospital and school PFI schemes were minimal and called for more public–private partnership models, particularly those that did not include private financing.

The report says: "Unless PFI delivers net savings through greater efficiency, the eventual cost will be at least the same under usual finance."

Chris Girling, Carillion's finance director, denied that the PFI did not make financial sense for the government.

He said: "The fundamental point about PFI is that the state has got an asset that is more predictable and cheaper compared with traditional methods."

Girling warned that too much debate over the PFI and PPP contract models could slow down the government's huge investment programme.

He said: "Everyone hopes that the debate doesn't delay what the customer wants, which is more prisons and school and hospitals. We will adapt, but what we cannot cope with is delay."

Patrick Waterfield, PFI director at consultant Cyril Sweett, defended the procurement process. He said: "PFI is here to stay. It's expanding into the private sector and abroad to Europe."

The decision to put nine PFI hospital schemes on hold comes after talks between the government and public services union Unison, which is strongly opposed to PFI.

The hospitals where the pilot will be carried out are at Stoke Mandeville, Buckinghamshire, Roehampton, south-west London and Havering, east London.

The other six hospitals affected are South Derby, Walsgrave, Central Manchester, Wharfedale, Kingston and Northampton.

The results of the pilot scheme are due to be published this autumn.