Treasury bows to critics of PFI targets

The Government yesterday bowed to criticisms of its Private Finance Initiative by announcing new measures designed to ensure that it hits its target of funding pounds 14bn worth of public sector projects by April 1999.

Michael Jack, Financial Secretary to the Treasury, announced fresh procurement guidelines for government departments to speed up the flow of deals under the initiative and cut the cost of bidding - one of the chief complaints of contractors.

He also disclosed that the PFI had hit its target in 1995/96 with pounds 4.8bn worth of deals agreed and a further pounds 660m at preferred bidder stage or due to follow shortly.

In a bid to bolster the initiative and drive home the importance attached to it by the Chancellor, Kenneth Clarke, Mr Jack is being sent on a nation- wide tour of PFI projects to spread the message to businessmen and civil servants alike.

Mr Jack also announced details of two new hospital projects worth pounds 260m in Swindon and Norwich and published two new case studies of PFI-funded prison projects designed to demonstrate value for money.

The launch of the next phase of the PFI came as the all-party Commons Treasury Committee was finalising a highly critical report on the initiative.

The report is expected to question whether the Government can hit its pounds 14bn target and to voice fears that ministers are cutting capital spending without being sure there will be private funding to make up the shortfall.

In the current financial year, the value of projects funded under the PFI is equivalent to nearly a quarter of the Government's total capital spending programme. However, of the pounds 5bn worth of projects awarded, the Channel tunnel high-speed rail link accounts for pounds 3bn.

Martin Laing, chairman of the Construction Industry Employers Council, welcomed the new procurement guidelines but cautioned they had to be understood by civil servants with day-to-day responsibility for PFI projects.

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