87 percent of respondents believed that the use of PPP had brought forward the timing of investment. Many commented that, at the time, they would not have been allocated funding to carry out conventional procurement. Capital budgets were already allocated to more pressing projects, in particular to carrying out essential repairs.
Our understanding is that these responses are an accurate representation of the reality faced by public sector managers in local authorities, hospital boards and within the water and sewerage sectors at that time.
Taking three of the sectors in turn:
• Local authority16. At the time that the contracts in our Survey were let, the local authority capital regime in place involved, in simple terms: (i) the provision of annual public borrowing consents (together with provision of rate support grant to cover interest and amortisation costs) and; (ii) separate funds to enable local authorities to support PPP payments on a like for like basis - e.g. Level Playing Field Support (LPFS), and the Strategic Waste Fund. Borrowing consents were allocated to local authority on a formula basis, whereas the separate funds were controlled centrally. The impact of this from the local authorities' perspective was to regard PPP as additional capital that could be used from a 'central pot' for projects that were not prioritised for public borrowing consents.
• Hospitals. The treatment of investment using public sector capital or PPP is the same. Both increase the capital charges faced by the NHS Board in line with the increase in the value of its assets. Although capital budgets, set centrally, have increased dramatically recently, we understand that there would not have been sufficient public sector capital available to fund major hospital PPP contracts (such as The Royal Infirmary of Edinburgh) at the time they were procured.
• Water and sewerage sector. In the water and sewerage sector, the majority of PPP contracts relate to improvements in water treatment infrastructure necessary to meet the requirements of the Urban Waste Water Treatment Directive. There was not sufficient public capital to achieve the specified standards by the end of 2000.
32 out of 34 authorities stated that their project was off the public sector balance sheet.
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16 Local authorities are responsible for PPPs in the education, local transport and waste sectors.