Blair is warned against private finance 'fixation'

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Indy Politics

The Government's use of the private sector in public services will be subject to scathing criticism today by one of Tony Blair's favourite think-tanks.

A special commission of the Institute for Public Policy Research (IPPR) is to publish a report pointing to serious flaws in the use of private-sector finance and disciplines in the London Underground and air traffic control.

The commission, chaired by Martin Taylor, who is also the chairman of WH Smith, will make clear it endorses the principle of using private expertise to improve public services, but it will warn that unless there are substantive changes in the way such partnerships work there will be none of the "quantum leaps" in the quality of provision promised by ministers.

The report, the most exhaustive study yet of public-private partnerships (PPPs), concludes that while such arrangements have saved money on road and prison projects, there is no such evidence with regard to schools and hospitals. It insists there should always be a real choice between the PPP option and conventional forms of service provision, and says they will not achieve public legitimacy if they are used as a "back-door way of cutting the terms and conditions of workers".

The report's authors argue that inappropriate use of PPPs could be avoided if local authorities and other revenue-generating public enterprises had greater freedom to raise capital and trade with other public bodies. Air traffic control could have been handed over to a non-profit trust, an idea taken up by the Conservative Party, while the Tube could have been subject to a more sophisticated management overhaul.

The authors conclude that in areas such as clinical services, where there is little evidence to assess, "a cautious approach" to the use of PPPs is required, with careful piloting and evaluation.

They state: "The current fixation on the existing model of private finance initiative also needs to change. During its second term Labour should set out to utilise a wider range of procurement models."

Accountability procedures in relation to PPPs are currently inadequate, the report warns, and recommends that the public and the National Audit Office are given greater rights to access information about PPPs.

Edward Davey, the Liberal Democrat economics spokesman, said: "The IPPR has blown a hole in Labour's privatisation agenda. [It] challenges every aspect of New Labour's addiction to private finance in the last parliament, from the PPP for the Underground to the repeated claim that such private finance schemes provide new money."