187/98
12 November 1998
GEOFFREY ROBINSON ANNOUNCES SECOND REVIEW FOR THE PRIVATE FINANCE INITIATIVE
A review of the Private Finance Initiative (PFI) and Public Private Partnerships (PPPs) is to be conducted in advance of the expiry of the Taskforce's mandate in late summer 1999, Paymaster General Geoffrey Robinson announced today.
Sir Malcolm Bates, Chairman of Pearl Group, has been asked to examine the progress made in the delivery of PFI and PPPs by this Government and in the light of this new experience, recommend any changes to the existing arrangements which could further improve the government's approach to PPPs.
In launching the Review, Mr Robinson said:
"We have made great strides with PFI in the past year. But we must continue to improve, identify and develop new opportunities and partnerships with both the public and private sectors. As well as improving value for money to the taxpayer this will ensure the delivery of a higher sustainable level of public sector investment.
"I want to see such partnerships extended beyond PFI. We need to exploit all commercial potential and spare capacity in public sector assets through a sensible balance of risk and reward. Sir Malcolm Bates' first report reinvigorated PFI and I very much look forward to reading the outcome of his second review."
The first review under Sir Malcolm Bates proposed the creation of the Treasury Taskforce to help central government departments and agencies road-test significant projects for their commercial viability. The Treasury Taskforce's two-year life comes to an end in late summer 1999. The Government wants to look ahead and ensure that the best possible arrangements are in place for a smooth transition at that time.
Sir Malcolm Bates will commence his review immediately and complete his work by mid February 1999.
TERMS OF REFERENCE
The purpose of the review is to make recommendations as how best to manage the execution in the public sector of sound PFI and Public Private Partnership deals. The review will be guided by the Government's objectives of introducing the best of private sector skills and practices into the management of PFI and PPP deals in order to improve value for money for the taxpayer, and of stimulating a steady flow of PFI and PPP deals in order to contribute to a higher sustainable level of investment in public sector infrastructure.
It will be conducted by Sir Malcolm Bates, Chairman of Pearl Group and Chairman of Premier Farnell. He has been asked to report by mid February 1999 to the Paymaster General.
His review will address:
(i) the steps taken by Government departments and agencies to implement the recommendations contained in the first review of the PFI by Sir Malcolm Bates;
(ii) the progress made and the lessons learned in the introduction of private finance into public sector infrastructure investment since the formation of the Treasury Taskforce;
(iii) the respective roles and effectiveness of the Treasury Taskforce, Department Private Finance Units and procurement teams in Government departments and elsewhere in the public sector in advancing PFI and PPP deals;
(iv) the extent to which the use of private sector skills and best practices have been adopted in the public sector in the execution of PFI and PPP deals;
(v) how best to plan for, develop and manage the future delivery of PFI and PPP deals in the public sector;
(vi) whether a lack of skills and resources in the private or the public sectors is a barrier to progress in bringing forward and executing PPP deals to give effect to the new Wider Markets guidance; and
(vii) what, if any, changes to existing institutional arrangements should be made following the expiry of the life of the Treasury Taskforce to achieve the Government's objectives of introducing the best of private sector skills and practices into the management of PFI and PPP deals in order to improve value for money for the taxpayer still further, and of stimulating a steady flow of PFI and PPP deals in order to contribute to a higher sustainable level of investment in pubic sector infrastructure.
NOTES TO EDITORS
1. Sir Malcolm Bates' first review into the PFI made 29 separate recommendations to improve the PFI which were accepted in full by the Paymaster General on 23 June 1997. All recommendations have since been implemented.
2. The principal institutional change recommended by the first Bates' review was the creation of the Treasury Taskforce, a team of policy and projects experts which acts as the focal point across Government for PFI. The projects Taskforce, under Adrian Montague, a former investment banker who was appointed to the post on 14 July has a limited life of two years.
3. The Treasury's new Wider Markets guidance was announced on 26 October 1998.
4. Sir Malcolm Bates' biography is available for the media on request from the Treasury press office (0207 270 5192).
5. Contributions to this review - to be kept to a maximum of side two sides of A4 where possible - should be sent to Ross Newby, HM Treasury, Parliament Street, London SW1P 3AG (0207 270 5518) by 4 December 1998 for onward transmission to Sir Malcolm Bates.
6. PFI deals augment public sector investment and stand alongside conventionally funded capital spending. The Procurement Review announced in the Pre-Budget Report covers all forms of public sector procurement, and will take account of any recommendations made in the second Bates Review in arriving at its recommendations insofar as germane to the PFI.
7.Details of the Procurement Review will be announced shortly.