Roadblock to £1bn of PFI highway cash
New rules threaten to send £1bn investment on highway to hell, says Clayton Hirst
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Your support makes all the difference.Senior Highways Agency officials have warned the Treasury that new rules on public spending could "kill off" more than £1bn of new investment in Britain's roads network.
Over the next five years the Government hopes to press ahead with around £5bn worth of road schemes – at least a quarter coming through the Private Finance Initiative (PFI). But insiders at the Highways Agency told The Independent on Sunday that draft proposals on assessing public schemes would render the PFI useless.
It could jeopardise ambitious plans being drawn up in every English region for new roads, bypasses and maintenance work, under the Government's 10-year transport plan. It would also be a blow to companies such as Balfour Beatty, Carillion and Skanska, which enjoy the lion's share of PFI road contracts.
The Treasury policies, contained in the "Green Book", set out rules for assessing whether a PFI scheme represents good value for money when compared to the Government simply paying for a project upfront. Critically, it puts a premium on PFI schemes because it allows the public sector to spread payments for goods and services over many years. But in the new rules, this premium has been reduced from 6 per cent to 3.5 per cent, potentially making the PFI less attractive.
The Highways Agency fears the problem will be exacerbated on road projects, which have greater upfront costs and a smaller service element when compared to other PFI projects.
One Highway Agency insider said: "This could kill off a whole raft of PFI projects."
Officially, however, the agency said that it wouldn't comment until it had finished consulting with the Treasury. A spokesman said: "The Highways Agency is looking at the implications of the consultation document and how it will affect our schemes. We will respond accordingly."
The Office of Government Commerce, the Treasury unit that controls Whitehall spen- ding, said the change in the premium should not be considered in isolation to other proposed changes to the Green Book. "The changes are designed to make procurement more transparent. The rate is just one factor," said a spokesman.
He denied the revisions to the Green Book would threaten road schemes: "Highways PFI projects are already among the best value for money."
The Treasury has given the Highways Agency until 18 October to make a formal response to the changes. A final draft of the Green Book is expected to be published before the end of the year. The new rules are due to come into force on 1 April 2003.
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