Fears over public work grow as local schemes are held back and PFI rescue fund fails to attract bidders

Government plans to bring forward public spending to ease the recession suffered another blow following claims that councils were postponing construction work in the hope of getting a better price from increasingly desperate bidders.

Senior industry figures have written to Cabinet ministers calling on the government to stop local authorities from shelving construction work.

The news comes as it transpired that only one government department was in discussions to make use of a fund to kickstart PFI projects worth up to £13bn.

Last week Nick Raynsford MP, the chairman of the Strategic Forum, wrote to business secretary Peter Mandelson calling on him to act over council delays.

He said: “The central government can do more to encourage local governments to spend now by linking funding and grants to a requirement for programmes being implemented within a set timetable.”

Councils may see short-term gains, but this will drive skills and capacity out of the industry

John Dodds, Kier

His comments were echoed by John Dodds, chief executive of Kier, in a letter to schools secretary Ed Balls on behalf of the UK Contractors Group. Dodds said councils were hoping to capitalise on tender price deflation. He said: “This is counter to government policy of keeping work flowing and bringing forward expenditure. Although councils may see short-term gains from this stance, in the longer term it will drive skills and capacity out of the industry.”

A spokesperson for the Association for Public Service Excellence denied councils only awarded jobs based on price, adding: “Councils cannot be seen to be getting anything less than value for money for taxpayers.”

Meanwhile, a government source said that Defra was in discussions with the Treasury about using part of a £1-2bn fund, created last month, to restart the stalled £3.5bn Manchester Waste PFI. However, the source said no other departments were in discussions over accessing the fund, which was supposed to help 110 stalled PFI schemes go ahead.

Michael Ankers, Construction Products Association chief executive, said he thought other departments were reluctant to use the money as they were concerned it would be subtracted from other schemes.