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New PF2: Government delivers new approach for investment in public infrastructure
Government delivers reforms that will enhance transparency and improve performance of public private partnerships.
The government is taking the next step in implementing PF2, setting out how it will invest and manage the government’s stake in new public private partnerships. It has also set out how the new model will provide increased transparency over who owns a share in our schools, hospitals and other public infrastructure.
Chief Secretary to the Treasury, Danny Alexander made the announcement at an infrastructure event, organised by think tank, Centre Forum. Speaking to an audience of industry and business representatives, he challenged the business community to work together with government to deliver the infrastructure the country needs.
The government announced last December that it will be able to invest a share of the equity in future PF2 projects – its preferred model of public private partnership. As a shareholder, the public sector will have a seat on the board, giving it a stronger voice on the decisions concerning management of the project companies, marking an important step towards increased transparency and better partnership relationships between the public and private sectors.
Following a consultation which saw representations from business, industry groups and other interested parties, the Treasury has published its findings and set out details of the new arrangements. The government will invest alongside the private sector into a ‘joint venture company’. Each company will be majority owned by the private sector and the government will invest on the same terms as the private sector.
The new standard legal documents, published today, set out the proposed terms of the government’s investment, and will be used as a template for all future PF2 projects that involve public sector equity. This includes details of the voting arrangements, the government’s right to appoint a director to each company and increased information other shareholders will be required to disclose. The government’s new approach will provide the public with more visibility over who has a financial interest in its schools and hospitals by requiring investors to disclose the beneficial owners of their investments in PF2 projects. The government will receive detailed information on the performance and financial position of the PF2 companies, including profits made. The arrangements also incorporate the government’s new policy regarding tax compliance and public procurements.
Chief Secretary to the Treasury, Danny Alexander said:
We’ve consulted extensively to make sure we get a workable model that services both the public and private sector as it should. As a shareholder, the public sector will have a stronger voice in the management of the PF2 project company and receive a share of the financial returns.
This is a fundamental reassessment of the old PFI and it will provide better value for the taxpayer, better public services, and a better infrastructure.
Commercial Secretary to the Treasury, Lord Deighton said:
The government will now sit side by side with private investors as a real partner in PF2 projects, sharing some of the risk and the profits too, to form better partnerships with industry so we can deliver the next generation of public infrastructure the country needs.
The Education Funding Agency is the first to issue the new standard form equity documents in privately financed element of the Priority Schools Building Programme (PSBP). The documents have already been issued to shortlisted bidders for the first two batches of schools.