PF2 has been designed to ensure that it is more flexible that PFI, by reducing the provision of soft services, such as cleaning, catering and security, and hence ensuring the contractor continues to be incentivised to take into account operational costs that may arise in the future. Instead, such soft services are to be provided separately through separate contracts or directly by the relevant authority. It is believed that this will provide the public sector with greater flexibility to amend service requirements as necessary. 41

HM Treasury have stated that holding a minority stake in the project will significantly strengthen the collaboration between the public and private sectors. Additionally, it is anticipated that this will enable increased financial transparency and visibility for the public sector, and stronger involvement in decision making. Finally, value for money is expected to be improved: by holding a minority equity stake, the public sector will receive a proportion of investment returns, subject to proper management of project risk, consequently reducing the cost to the public sector.42 It is important to note, however, that there is no guaranteed return on the public sector's investment.

There are concerns that increasing the equity proportion of the project will increase the overall cost of capital of the project: cost of equity is higher than the cost of debt, partly because it carries greater risk.43 On the other hand, by increasing the amount of equity within the project, the new structure may enhance the debt rating, making it more attractive to a wider range of providers of long-term debt and therefore bring down the costs. 44

The transfer of risk to the private sector is perceived to be lower than under PFI45, limiting the value of money PF2 will deliver:

Witnesses told us that PF2 will involve less risk transfer than PFI. Witnesses also said that PF2 would increase the cost of capital still further. If they are right, the value for money of PF2 contracts for the taxpayer will-unless PF2 delivers savings in other areas, such as construction-be even lower than that of PFI for money of the scheme.46

It is also important to take into account any benefits or opportunities that may be missed as a result of the public sector's money being used for equity investment rather than elsewhere, such as in the reduction of public sector debt.47 If this investment could instead be allocated to another source which would result in better returns for the taxpayer, the PF2 project would represent lower value for money.

There is a lack of consensus on whether the added aspects of PF2 will provide value for money