Chancellor Philip Hammond managed to get the phrase “public-private partnerships” into his Autumn Budget speech.
While he may have used the phrase to refer to his plans for new ‘garden towns’ rather than a pipeline of new PF2 deals (as promised this time last year), it was at least an attempt to make the phrase politically acceptable once more.
After years of avoiding using such a phrase in a positive way (the announcement on the PF2 pipeline was contained in last year’s Autumn Statement documents, rather than Hammond’s speech itself), it may be the first glimmer of hope that there are at least some politicians that would like to see the concept of private finance in public infrastructure reinvigorated.
Sources suggest that Hammond was referring here not to your typical PF2 or even standard PPP programme, but more a call to Chinese investors (in particular) to come and fund the wholesale creation of new communities.
However, his speech did contain some promise for a more traditional type of PPP deal, with a pledge to create a new East West Rail Company to speed up delivery of part of the new route between Oxford and Cambridge. It is understood that a design, build, finance and maintain model is being considered for that route.
Perhaps most telling when it comes to the PPP market, though, was the Tyne & Wear Metro rolling stock decision. Until recently, a privately financed solution was being considered. But with local politicians voicing strong opposition to that approach, Hammond managed to find the money in the public coffers to fund the whole thing.
Officials will no doubt insist that the decision was taken on value for money grounds, but it seems unlikely that politics did not play a part.
Hammond may have managed to get the phrase “public-private partnerships” into his speech, but he and his colleagues obviously did not feel politically strong enough to push through a privately financed option against local opposition.
And no wonder. After this year’s disastrous election campaign, this Budget was in desperate need of some good news – particularly for those communities outside London. Hammond might not be considered as ‘political’ a chancellor as his predecessors Osborne and Brown, but even he could not fail to see the threat of a good news story for a northern constituency being overshadowed by anger at the use of private finance.
The question that this raises, of course, is how many other schemes will be pressured down the public funding route by local opposition?
The few hospital trusts to have broken cover and admit they are considering using PF2 for new buildings have already faced a barrage of criticism in their local media. It will take a lot of hard work and education of the local population for trusts to bring people round. And given that most trusts in this position have effectively said PF2 is their only option because ‘the health department said so’, it is far from clear that any of them would keen on such an exercise.
It has generally been assumed that transport projects are far less controversial – hence the A303 and Lower Thames deals, plus the East West Rail line. That may still be the case for the big projects. But for urban transit, the Tyne & Wear Metro case suggests the current arithmetic in Parliament will make private finance a tough sell.
Meanwhile, a question mark still hangs over this government when it comes to delivery. Plans for five new garden towns are certainly bold, but details on how they are rolled out remain sketchy. Indeed, it is understood that the Treasury has yet to work out the funding and financing approach that will be used.
In a similar vein, there remains uncertainty over the government’s NHS plans. Community Health Partnerships’ Project Phoenix has been ready to go since Easter, but is still waiting on ministerial sign-off as we approach Christmas. Hammond pledged more cash for the NHS, including to improve the estate, adding that money will be “accompanied by private finance investment in the health estate where this provides good value for money”. But this again remains a vague notion.
So for many in the industry, there was little Hammond could offer them that would have got them truly excited. What the market really wants to see is action, not just words.