1. In recent years the OECD43 and HMT44 have both indicated that UK economic performance has been impaired by a historic under investment in infrastructure, particularly transport infrastructure. The UK also requires major investment to secure energy security, improve the resilience of our infrastructure networks and deliver the transition to a low carbon economy.
2. ICE believes that to secure maximum value for money, any funding mechanism should contribute to the creation of a stable workflow with reasonably predictable costs. It should also minimise costs for all bidders and allocate risks to where they can most effectively be managed.
3. Evidence from our members suggests that PFI does meet some of these goals and has facilitated investment. PFI also has the advantage of making transparent the ongoing maintenance costs associated with infrastructure. In this context, while much of the opposition to PFI has focused on costs imposed on future generations, an alternative view is that PFI protects vital maintenance spending by taking it out of the short term cycle of public expenditure planning.
4. However for projects below circa £30 million the high cost of bidding can restrict competition and thus gives cause for concern over value for money, particularly where significant design work is required by bidders.
5. We also note that a lack of comparability between projects within and across infrastructure sectors makes it difficult to make a generic assessment of the performance of PFI projects. However this is not necessarily a reason to seek greater standardisation as the structure of elements such as payment mechanisms and specific risk transfers should reflect the needs of individual clients.
6. ICE also believes that improvements to the effectiveness of PFI, or any alternative funding source, such as a National Infrastructure Investment Bank will require other changes to the policy and institutional environment for delivering infrastructure projects. We strongly support the provisions in the Planning Act 2008 for the creation of National Policy Statements for infrastructure and for a streamlined planning and licensing approval process via an Infrastructure Planning Commission. This should reduce political risk for all parties and thus reduce the cost of funding projects. The government's recent commitment to create a new body, Infrastructure UK, charged with taking a long term view of the nation's infrastructure needs and identifying how they can best be delivered also has enormous potential in this area.
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43 OECD (2007) Economic Survey of the UK
44 HM Treasury (2007), Productivity in the UK 7.