Back to work

So there we have it. The government can save £1.5bn on operational PFI contracts, and in almost the same breath has given the go-ahead to a large swathe of new projects.

People have long hoped the coalition would simply rebadge Labour’s beloved PFI programme and carry on with the same ideas.

It was an agonisingly long time coming, but in the end the new crop of ministers didn’t even bother to find a new name for the initiative.

Instead, we now have an apparently more efficient PFI regime, backed up by a planned voluntary code of conduct and a centrally led review of all operational schemes.

But how effective will that be? It is perhaps telling that the approach of implementing this programme-wide review is quite different to the tack taken by Infrastructure UK in its efforts to reduce engineering costs in public contracts.

There, an action plan formed part of the initial report, setting out in some detail how and when the government expected to make savings in contracts. If nothing else, it offers a list of deadlines against which progress can be measured and to which ministers can be held accountable.

In the PFI review, there are only vague mentions of a voluntary code of conduct, and of the government driving changes across PFI deals. There is no set timeframe for the proposed £1.5bn of savings, and no proper agenda detailing how the work will be monitored and progressed.

Nonetheless, the announcement does seem to have had the positive effect of allowing the government a way out of the tricky ‘anti-PFI’ corner it had backed into over the past 12 months. In particular, it enabled Education Secretary Michael Gove to smuggle out a multi-billion pound school building programme, without too much criticism for taking a year to deliver a plan not too dissimilar to the pre-Building Schools for the Future model.

But perhaps more importantly, it has allowed arch PFI critic Jesse Norman to claim a victory of sorts – letting the government off the hook when announcing new PFI programmes.

In response to the operational costs review publication, Norman said he was “delighted”, suggesting his campaign had been successful.

It has not. It is important to make a clear distinction between making savings in operational contracts – which is what the government has claimed it can deliver – and Norman’s campaign for a “rebate” from all PFI contractors. The idea that companies – many of which were no longer involved in the projects (for example a builder on a hospital completed a decade ago) – should voluntarily give money back to the public sector was always a non-starter.

Either way, though, the fact that Norman is apparently contented by this outcome is good news for the industry.

Perhaps, after more than a year of soul-searching and political hot air, we can finally get back to the serious business of building the infrastructure that is still badly needed across the country.

For an in-depth look at the Treasury’s savings in operational PFI contracts report, see the September issue of Partnerships Bulletin.