PLC Public Sector reports:
Figures published recently confirm that 2009 was a record year for PFI deals. Unfortunately, the record in question was, not surprisingly, a record low rather than high.
The financial value of the 35 PFI deals signed off in 2009 has been stated to be £4.24 billion. This may seem to be a vast sum of money, but is in fact a lower figure than for any other year in the “noughties”. The figure is also boosted by the inclusion of deals such as the Greater Manchester waste PFI, an £800+ million project that may not have closed without an injection of public funds from HM Treasury’s Infrastructure Finance Unit (reports indicate that only £245 million of the total invested came from the private sector).
Few will be surprised by this record low year given the economic climate, and some comfort can be taken from the fact that the number of closed deals (35) is actually one up on the 2008 figures (although 2008’s 34 deals amounted to a reported value of £6.82 billion). However, this does not mean that questions do not need to be asked, particularly:
- Given the need for financial investment to get the UK out of the recession, and given the Government’s actions in saving the UK banking industry from the abyss, is it right that the level of support given by banks to PFI is significantly lower than the sums that those same banks are expected to pay to their employees as bonuses in the coming months? (Estimates in October 2009 stated that UK financial companies had set aside more than £6 billion for bonus payments.)
- Given the current Conservative/Labour competition to announce the most brutal, quickest spending cuts, what does 2010 hold for PFI?
- With ever-decreasing sums of money available to fund new infrastructure, what chance do local authorities have to meet targets that pre-date the recession, such as landfill diversion and recycling targets?
Whatever the answers to these questions, it is clear that public sector purchasers will need to make the most out of every pound spent to deliver the best value for money. In light of this, the increasing pressure to achieve policy objectives through procurement spend, while laudable, does not come at a great time for public authorities with limited budgets.