Public service reform

Nov 6 2007 by Liz Smith, The Journal

WITH a new Government in place, the CBI has been watching carefully to monitor what level of emphasis is being placed on public service reform.

Business has an interest in public services from three angles – firstly as a funder, through the taxes they pay, secondly as a user and thirdly, and increasingly, as a provider. This provision comes through various avenues, whether direct procurement or via the Private Finance Initiative.

CBI sees PFI as a significant driver of public service reform. In particular, we have seen the transformation of many public buildings and services which could not have happened without the PFI. And whatever accusations may be levelled at it, it represents a huge improvement on what went before. Earlier this year, the CBI published a report which appraised the PFI and asked where it is headed. We called for the Government to be a more active champion of the PFI and the next generation of public-private partnership models.

We said the benefits of these should be assessed in terms of what they can achieve against policy objectives.

This is crucial not just for the public, but also to give the market confidence to invest in and develop innovative solutions to meet new challenges.

We know that figures on the PFI are significant. Since its inception in 1992, 620 deals have been signed, with an aggregate capital value of £57bn.

Over £10bn worth of projects have been signed in the last 18 months alone, and the pipeline of projects expected to reach financial close by April 2011 is £22bn.

The 520 PFIs already operational have resulted in 230 new or refurbished schools, eight new prisons, 39 new hospitals, 58 transport projects and 41 water and waste projects. Almost all local authorities have been involved in PFI projects.

The recent Comprehensive Spending Review described the PFI as playing ‘a small but important role in the Government’s investment in public services’; and promised that ‘the Government will continue to pursue PFI projects where they demonstrate value for money.’ While this is welcome, very little detail is added.

The lessons from PFI are also having a positive effect on traditional procurement. This is good news but, again, we don’t have the information from which to draw clear conclusions.

In the North-East, with such high levels of public sector employment and increasing numbers of regional firms doing business with the public sector, we will continue to work hard to ensure that the business voice is heard as the Government’s reform agenda moves forward.

Liz Smith is assistant regional director of the CBI North-East.

This project will try to identify risks