The Financial Inclusion and Markets Centre (FIMC) submitted evidence to The Committee of Public Accounts – often referred to as the Public Accounts Committee (PAC) – Inquiry into the Government’s use of private finance for infrastructure.
The PAC has now published its report Government’s use of private finance for infrastructure
In our submission, we focused on the potential risks and harms for consumers and citizens of using various forms of private finance to fund core physical, green, and social infrastructure. Given our remit, we also focused on the funding of core infrastructure, not the delivery or building of infrastructure. The FIMC submission can be found here: FIMC submission to Public Accounts Committee Inquiry Private Finance Infrastructure final 0425
Although the PAC Inquiry was limited in the number of issues it covered – for example, it did not cover the impact of using private finance for infrastructure on consumers and citizens – we were pleased to see that it recognised that this form of finance can be more costly than state funding and can create the illusion of lower public borrowing and risk transfer.
The PAC also highlighted that there is no comprehensive framework for considering risk allocation between the public and private sector when working in partnership.
The PAC raised concerns that HM Treasury is yet to set out the principles and approach for aligning private financing models to the appropriate infrastructure projects, and its poor evaluation record has meant that no comprehensive evaluation has been undertaken to determine the cost and benefits of these financing models. It recommended that, to maximise the chances of delivering value for money, HM Treasury should evaluate the costs and benefits of alternate financing models, including the different costs of borrowing in the public and private sectors, to identify a preferred model for different types of infrastructure.
This is an important report. We hope the Government takes on board the PAC’s recommendations. Decisions made now will affect generations to come. We must avoid the mistakes of the previous PFI regime. The UK economy, public sector, and citizens are still paying the price for that.