Smith said under the proposals, most of the Treasury PFI taskforce will be transferred to Partnerships UK, which will be a public-private partnership. The policy-forming element of the Treasury taskforce will go to the Office of Government Commerce, which will also be formed in the new year.
The construction industry feared that Partnerships UK, to be known as PUK, would take stakes in PFI projects like a bank, and would cherry-pick the most lucrative projects. But Treasury taskforce head Adrian Montague, who will be deputy chairman of PUK, told Building that the body would only take equity stakes to develop wider markets in projects that were difficult to promote, because they required liaison with clients from different sectors. He cited as an example local authority projects that included a mixture of schools, healthcare and housing.
Montague this week said: “Even big cities find PFI difficult. PUK will help manage and [financially] support the transactions.”
Major Contractors Group chairman Keith Clarke welcomed the fact that PUK would have some equity. He said: “It is crucial for PUK to have a genuine financial incentive to deliver closed deals to ensure that it does not simply add another layer of bureaucracy to an already complex process.”
MCG director Jennie Price said: “PUK must take the risk for its advice. If it puts up £500 000 of advice to take the deal to financial close, then it must do so. It cannot claim more money later.”
Pat Gardiner, managing director of Jarvis Projects, welcomed the proposals: “It will raise the skills base in the public sector and that’s important because for each PFI client it is their first time.”
Gardiner is concerned that the PFI project review group, which will transfer to the Office of Government Commerce, should analyse public sector comparators more rigorously. “Each project needs an independent audit. After all, banks have to undertake rigorous due diligence on projects before going ahead,” he said.
Barbara Ainger, chief executive of the Housing Finance Corporation, which has raised £1.2bn of capital for registered social landlords, said the proposals would allow PUK to form bundled projects across sectoral and local authority boundaries. Deals that were previously considered too small could now be bundled with similar small projects in neighbouring authorities to give them enough weight, she said.
Smith announced that Derek Higgs, chairman of Prudential Portfolio Managers, is to be chairman of PUK. A chief executive has yet to be appointed. He said three pilot projects were being considered for PUK. They include a bundle of secondary schools in Glasgow.