44. The financial crisis has had an impact on the short-term affordability of private finance and led to speculation about the long-term role of this source of funding in public service projects.
45. However, despite the credit crisis, deals have continued to close. This has been enabled by club deals involving many more banks than before and the presence of the European Investment Bank in the UK projects market, as well as the establishment of the Treasury Infrastructure Finance Unit (TIFU).
46. It is important that measures involving public funds are only temporary, and do not replace the role of the capital market in the longer term. Creating a national infrastructure bank would negate the positive impact of risk transfer that is achieved by involving private finance in projects, and remove the due diligence that has been applied to many successful projects.
47. Private finance models should embrace new and innovative features to ensure a continued focus on outcomes and value for money in public services. For example, a greater usage of payment by results in contracts could incentivise providers to join now-riskier markets and generate new PPP projects whose driving force is continuous innovation and improvement.
September 2009
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