Labour 'not to lean on private sector'

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The Independent Online

A Labour government would not use private sector investment as a means of dodging the tough rules it would apply to public borrowing, Gordon Brown, the Shadow Chancellor, said yesterday.

In a speech to a conference on public-private partnership in London, Mr Brown floated for the first time the idea of government insuring private sector companies against risk incurred in the financing of projects carried out jointly with the public sector.

He also said he would consult on a proposal for the government itself to invest in new companies specialising in "design, construction and operation" of public-private sector projects.

But Mr Brown insisted that partnership would not be used to dodge his previous commitment that the proportion of debt to Gross Domestic Product would remain "stable" over the economic cycle.

Iin contrast to the role of the state envisaged by "old Labour", the government would be a "catalyst, sometimes steering rather than rowing", he declared. Mr Brown said it would "set the rules and standards - not necessarily always provide the services".

Cataloguing the urgent need for refurbishment of railways, roads, housing, sewerage, hospital buildings and schools, Mr Brown argued that the Government's Private Finance Initiative (PFI) had "not in any way" compensated for cuts in public investment.

In the initiative's first 28 months, private finance levered into infrastructure projects had totalled only pounds 500m, compared with the pounds 12bn of projects announced by Kenneth Clarke, the Chancellor, as "either under way or under consideration" in September 1993.

Insisting that Labour would be able to promote lasting partnerships between public and private sectors, Mr Brown set out proposals, including two ideas for tackling the critical question of the private sector's reluctance to carry the risks involved in big infrastructure projects.

Mr Brown said there might be "limited circumstances" in which the government might insure its private partners against elements of risk such as changes in health and safety regulations by future governments.