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PFI: the new challenges

by Michael Izza on 17.02.2012 03:39

PFI has come under serious public criticism from politicians and business people over the past few years. 

 

After Whole of Government Accounts have revealed what a large part of Government spending PFI represents, is it a tool that can, if used well, still deliver public services? This is a serious question, with public money in the UK and elsewhere facing severe constraints. 

 

ICAEW thinks the answer is yes but with some serious changes made to the way in which PFI schemes are managed, and only if the right skills and standards are in place to manage them (both within the public and private sectors).

 

Given the Government’s austerity policies and the need to manage public money better to make it last longer and go further, the private sector is needed to help deliver public infrastructure projects that offer value for money. 

 

Yes, there were problems with many of the early PFIs with the balance of knowledge on the side of the private sector, which led to unbalanced and inequitable deals. We need to learn the lessons from these early deals so that future schemes have a better chance of success.

 

For many years ICAEW has campaigned for transparency, accountability and good governance in the public sector in order to support the effective delivery of public services and value for taxpayers money.

 

We do believe PFI can be an appropriate public sector procurement tool.

 

What are the upsides of PFI? It can  stimulate growth and job creation in small and medium enterprises (SMEs) that form part of PFI supply chains.

 

At a time when the public sector is short of cash, it can help make necessary investments. If we don’t leverage off the potential investment within the UK, potential investors are going to go elsewhere (to other countries where the investment is also badly needed). Is the UK prepared to take the chance of losing investment in its own growth?

 

Here’s a note of warning.

 

The reforms need to include good financial management and above all the development of skills and capabilities of those managing the PFI programmes. It’s not just about accounting for money after it has been spent, the finance function needs to be involved with projects from the beginning before funds are committed (at the feasibility stage).

 

It’s also about having the right leadership, culture, skills and capabilities in place. Strong financial management needs leadership from the top and only when we see changes in culture, integration and embedding of the finance function throughout the organisation will we see better skills and capabilities in government.

 

And with the long term liabilities for PFI now a known sum, the public sector should be in a better situation to judge whether PFI is the right course.