11. What system of public sector procurement would you like to see in place of PFI?
It is important to begin with principles. If the goal is a universal service on the basis of need then redistributive mechanisms must be designed in to both funding and delivery in order to achieve equity. If redistribution is impeded, the result will be service fragmentation, segmentation and reduced risk pooling. The funding and allocation mechanisms have to be designed for equity and so too do the systems. The end of PFIs status as "the only game in town" would lead to less distorted decision-making and better value for money. The rationale behind capital charging and resource accounting also needs to be re-examined, as does their potential to increase inequities and to reduce public services.
Public sector net debt is due to reach 76.2% of GDP in 2013-14, from 43% in 2008-09 (HM Treasury 2009c). In this context, the government has confirmed that public sector capital spending will be reduced significantly over the coming years, from more than £37billion in 2008-09 to £22 billion in 2013-14.
With the national debt rising and the rate of capital funding diminishing, the fiscal advantage of private finance may, from a political perspective, be more attractive than ever to the government; and ministers confirmed in the annual budget statement of April 2009 that its "strong commitment" to private finance will continue (HM Treasury 2009c).
There are currently 117 PFI projects in procurement, with a combined capital cost of £12.4 billion. Contracts for £4.4 billion of PFI projects are to be signed in 2009-10, with a further £3.54 billion signed in 2010-11 (HM Treasury 2009c).
However, as current expenditure is predicted to fall in real terms over the coming years, the costs of contemporary PFI projects will clearly be a major call on public sector budgets. The extent to which the public sector is getting value for money for these schemes is therefore an issue of the first importance.
November 2009