Turning the corner

9 January 2012 Forget the Olympics and the Queen’s Jubilee, privately-financed infrastructure is going to be the big story of 2012
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In these early days of January, it is easy to feel pretty negative. This year, though, there might be more reasons to be cheerful and positive than in recent times.

Yes, the economy is still struggling to get into (never mind out of) first gear. And yes, the second National Infrastructure Plan is full of projects that essentially constitute a wishlist rather than a firm commitment to new investment programmes.

But there is a lot going on in the infrastructure arena this year, and most of it will need private money if it’s to have any success.

With most authorities now having cut almost as much as they can to deliver the savings demanded by central government, many are beginning to take breath for the first time and look more strategically at what they are doing. As a result, we saw a number of local asset-hacked vehicles (LABVs) going out to tender in the final months of 2011, and these will progress over the course of this year.

Then there are the chunky infrastructure projects, like the Mersey Gateway, which is finally out to tender, and High Speed Two. To that can be added the remaining hospital PFIs, in particular the Royal Liverpool, which appears to have thrown off the legal battles that have dogged it in previous years.

Waste, too, looks set to be a major player in 2012, as several deals that have been bogged down in planning may at last start to come through. Partnerships Bulletin figures show that seven deals signed last year, at a combined capital value of £949m. And Treasury figures suggest there’s a further £1.3bn to sign over the next two years.

At a more strategic level, the outcome of the Priority Schools Building Programme is due ‘imminently’, offering at least some work to starved education specialists.

Sitting above all this, however, is the PFI review and its outcome – expected in the Budget. The hope remains that the Treasury will finally come up with a model that allows private investment to flow into public infrastructure without the baggage and negative press of ‘old’ PFI.

But as the government continues to push forward its localism drive, the danger of the new PFI model getting just as bad a reputation as its predecessor also increases.

A recent BBC article highlights the threat. Although not related to any PFI deals, the report claims some schools are being charged "up to 10 times too much" for IT equipment by private firms. According to the piece, schools have in some cases unwittingly entered lease agreements.

The article highlights the threat of public organisations, without the commercial skills of the private sector, being ripped off.

It’s a familiar criticism of PFI. Many public authorities now have the necessary commercial skills, having spent years working with private contractors in PFI deals. But headteachers and others who will in future be increasingly expected to be on the frontline of negotiations, through Academies or GP consortia in health, won’t necessarily have that expertise.

If they are taken for a ride by unscrupulous private providers, ‘PFI Mark II’ may struggle to get any public support.

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This page was last updated on:
9 January 2012.

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Turning the corner

Forget the Olympics and the Queen’s Jubilee, privately-financed infrastructure is going to be the big story of 2012

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