Monday, February 13, 2012

Dreadnoughts and the PFI Review

File:HMS Dreadnought 1906 H61017.jpg

The British Grand Fleet at the Battle of Jutland was led by Admiral John Jellicoe. As the commander of the fleet of dreadnoughts sent to battle in the North Sea in 1916, Winston Churchill observed that Jellicoe was 'the only man on either side who could lose the war in an afternoon'.

Similarly, the long course of the Private Finance Initiative (PFI) in the UK will be set by the outcome the HM Treasury review – of which the deadline for evidence was last week.

The review is timely and necessary. Timely, because it makes sense for the UK to review its infrastructure procurement methods, to assess the public services that the private sector can be harnessed to deliver, and valuable to decide what has worked and what needs to change in the future. Necessary, because the public policy debate concerning PFI had reached levels of misunderstanding and acrimony that were starting to damage the UK sector abroad, as well as at home.

TheCityUK’s contribution to the review is a response document prepared after consulting our members, so thank you to everyone who has taken part. In the paper, we propose that the government cuts down the length, cost and complexity of the procurement process in the UK. We also discuss the role of a centralised agency staffed by procurement professionals to help concentrate and retain public sector procurement expertise. There will be examples from abroad – often built on the UK’s own experience and then revised to take into account of local needs.

I am sure many of you saw The Economist commenting how successful UK export firms were able to, “benefit from long experience of public-private partnerships, which were pioneered in Britain (and often have a poor reputation there) but have spread to other countries”. One of the most important determinants of success for PFI or its successor model in the UK will be how far we can foster a stable, supportive political environment. So reputation matters. The results of the review must promote confidence amongst practitioners, investors, consumers and the wider public.

The review, if completed correctly, will enable the UK to reap the twin rewards of inward investment and export opportunity.  If not, the UK could lose out in the global competition for funds and see the stifling of a once successful, global growth-oriented sector.

While Jellicoe thundered during his battle, “There seems to be something wrong with our bloody ships today”, he was still successful. Indeed, his opponents in the Kaiser’s High Seas Fleet returned to their home ports for the rest of the war, making Jutland a strategic victory.

The PFI review submissions have now reached government. The direction and course will then be set by HM Treasury and those who sail in her. Full steam ahead.

Follow this link to read our response to the PFI Review in full.