Fat-cat row over Whitehall links with PFI businesses

THE Government came under fire yesterday for allowing senior businessmen to move from highly influential Whitehall posts, involving billions of pounds of taxpayers' money, to companies with a direct interest in the projects concerned.

Top private-sector executives on secondment to the Civil Service have helped to design the Private Finance Initiative, which attempts to secure private investment in public projects, and then switched to highly paid jobs with links to the scheme.

During their time in Whitehall they developed close relationships with senior civil servants and, it is claimed, are privy to priceless "insider" information.

Three businessmen in particular are named by critics as people who took up key roles involving PFI and then returned to jobs in the private sector where their experience could give them a critical advantage.

One is Sir Malcolm Bates, chairman of the Pearl Assurance Group, who was appointed by Geoffrey Robinson, the Paymaster-General, to carry out a one-man review of the policy. The review was completed in June last year and all 29 recommendations to strengthen PFI, established by the Conservative government but enthusiastically adopted by the Blair administration, were accepted.

Within weeks of completing the project he was appointed a director of BICC, part of a consortium which last week won a pounds 1bn contract to refurbish and maintain London Underground's power-distribution network. Through its companies Balfour Beatty and Haden, BICC has been involved in other PFI projects, including North Durham Hospital and the pounds 235m Royal Edinburgh Infirmary scheme, one of the biggest.

In December 1996, Robert Osborne, a senior executive at Tarmac, was made head of the unit dealing with the initiative at the Department of Health. Just over a year later he went back to Tarmac to lead its PFI department. It is the main partner in a consortium building a large hospital on behalf of Dartford and Gravesham NHS Trust, the first major health service agreement to be signed. It is also involved in an NHS project at Swindon and Marlborough.

Mr Osborne took over from Andrew Neill, who spent a year at the health service unit until he left in December 1996 to return to Guinness Mahon, which also a key player in PFI.

Rhodri Morgan, Labour chairman of the Commons public administration committee, said that secondees from the private sector should be bound by the same rules as civil servants and ministers. Where there is any question of a conflict of interest, government employees are expected to wait two years before taking up an appointment.

Several trade union leaders voiced concern at the situation. One said that, if a senior union offical had a similar conflict of interest, the CBI would "raise the roof ".