PFI to be boosted by City experts to revamp

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THE TREASURY is to spend pounds 20 million setting up a team of highly paid City experts who will aim to attract billions of pounds of private sector investment in schools, hospitals and other public services.

Ministers promised yesterday that there would be strict rules to prevent the City figures facing a conflict of interest between loyalty to their former employers and their work for Partnerships UK. Its job is to breathe new life into the Government's Private Finance Initiative (PFI).

Alan Milburn, the Chief Secretary to the Treasury, said there would be "no doubt" that the new body's loyalty would lie with the Government. He said it would be better to recruit full-time experts than to second people temporarily.

The minister said Partnerships UK would have to offer salaries comparable with those in the private sector, although pay would be strictly tied to performance.

"To get good people you need to pay good salaries," he said.

Another potential problem could arise because UK Partnerships will advise the Government on the merits of projects in which it may have a financial interest.

The Government will hold a maximum 49 per cent stake in UK Partnerships. Ministers hope that the PFI programme, which has so far funded building and computer projects worth pounds 4 billion, will rise to pounds 12 billion by the next general election.

Some Labour activists are worried about the use of private money for frontline services and concerned that taxpayers will face a "postdated cheque" for PFI projects.

Mr Milburn said he was aware of the argument that the scheme involved "mortgaging the future" but insisted that it would ensure better services and value for money for taxpayers.

He insisted that Partnerships UK would not operate as an investment bank in competition with the private sector, although it will offer funding to get PFI projects off the ground if private finance cannot be found.

Ministers expect the initial capital for the company to be provided in equal part by the private and public sectors. The Government plans an initial pounds 20 million cash injection followed by an additional pounds 170 million in guarantees.

t The Treasury also announced a new centralised Office of Government Commerce to manage Whitehall's pounds 13 billion-a-year procurement budget. The aim is to save pounds 1 billion over three years on the cost of everything "from buildings to paper clips".

The Government is the biggest purchaser of goods and services in the country, and ministers want to exploit this power. They believe the present system is inefficient and claim it costs pounds 30 for a department to buy a new stapler machine.

Business outlook, page 15