Chancellor mulling whether to reboot initiative which has been mothballed since 2018
Wates has called on the government to rethink its position on the Private Finance Initiative and use the model to fund a swathe of building projects in the coming years.
PFI was used to fund a host of projects in the 1990s and 2000s but has been mothballed for the past six years with then chancellor Philip Hammond declaring PF2, the successor scheme to PFI, “inflexible and overly complex”.
PFI differs from traditional public sector build projects because it sees the public sector engage a private consortium to finance, design, build, operate and maintain a public asset over a fixed 25-year period – with the private sector’s costs paid back through an annual “unitary charge” once the scheme is completed.
Chancellor Rachel Reeves is mulling whether to use a form of PFI to bankroll the government’s pledged building programme but critics have argued the cost of such schemes, which are funded through private borrowing, is more expensive than traditional publicly-procured construction while public sector bodies are saddled with ongoing liabilities.
Wates says new private-public partnerships are needed to deliver the next round of critical infrastructure such as schools, hospitals, housing and defence.
>> See also: What is the value for money case for and against using the private finance initiative to fund social infrastructure?
>> See also: How do we fund the future? How Building’s new initiative will look at options for financing public projects
It has drawn up a so-called Alliance Investment Model white paper which it says will improve on PFI through co-ownership and increased efficiency “to deliver true value for money for the taxpayer and good investments for the private sector”.
It added: “It can help deliver the capital required for new public projects in a fiscally sound way – including helping to unlock pension fund investment with more government involvement – and with safeguards built in to ensure past mistakes are not repeated.”
The plan is being launched at property show UKRiiF which is being held in Leeds.
Wates chief executive Eoghan O’Lionaird said: “If we back the right assets and pick the right partners for projects over the next decade and beyond, using standardisation to drive efficiency, alongside shared responsibility and effective oversight, we can deliver a new chapter of quality infrastructure investment.”
Building’s Funding the Future campaign seeks to examine fresh ways of attracting and using finance to boost construction projects at a time of constrained public finances.
It will examine options for public-private partnerships that can draw on private capital to pay for large infrastructure projects, schools, prisons, hospitals and housing.
It will also look at existing models for private and public funding and examine how these can be optimised to ensure funding is efficiently spent and leads to more shovels in the ground as Keir Starmer looks to construction to boost flagging economic growth.
Over the next few months we will share learning, consult with industry and collect ideas from readers. This will culminate in a special report to be published at our Building the Future Live Conference in London on 2 October - click here to book your tickets now.
To share your ideas of new funding models, email carl.brown@assemblemediagroup.co.uk. To find the campaign on social media follow #Buildingfundfuture.
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