22. The impact of the banking crisis in 2008 was bound to affect the supply and cost of private finance. In 2009 the value of completed PFI/PPP deals is reported to have been £4.24bn, the lowest annual total for a decade.8 Mr Adrian Olsen of Bank of Ireland told us that "… the shortage of both capital and liquidity … has had a significant effect … on the availability of bank debt" (Q 420). At the same time, the prospective squeeze on public expenditure will also reduce the funds available for public infrastructure projects.
23. The Government set up the Treasury Infrastructure Finance Unit (TIFU) in March 2009 to lend to private finance projects struggling to raise funds from commercial banks.9 By the end of 2009 TIFU had only made one loan of £120 million to the Greater Manchester Waste Disposal Authority's PFI project. However, the PPP Forum welcomed its creation, saying confidence had been bolstered "simply by its existence". The availability of commercial lending to some projects "has been due in some part to the backstop that TIFU provides … allaying funding concerns that might have otherwise stalled deals" (p 221).
24. Despite the scarcity of private finance, there are few advocates of a return to the old system of public procurement in those sectors where PFPs prevail. But PFP payments are contractual commitments and, as public spending is constrained, could have an adverse impact on the budgets available to public authorities for other, non-PFP, expenditure. They could, for example, exacerbate any budgetary pressures arising from unforeseen bunching of commitments and demands in a given financial year. The Government should monitor and control year by year the impact of PFP commitments on the budgets of Departments and public authorities with a view to ensuring that delivery of essential public services in future years is not unduly constrained or jeopardised by such commitments.
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8 "Financial Times", PFI feels the pinch, 15 January 2010.
9 HM Treasury, The Infrastructure Finance Unit (TIFU) available at http://www.hm-treasury.gov.uk/ppp_tifu_index.htm