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George Osborne’s PF2 will mean the taxpayer pays more for schools and hospitals says property entrepreneur on Tue 11th December, 2012
George Osborne’s autumn statement last week included an overhaul of the Private Finance Initiative ( PFI) but property entrepreneur and ex-investment banker Will Davies predicts that PF2 will cost the taxpayer more to build schools and hospitals.
The Labour government instituted PFI as a way for private investment to pay for the construction of vital infrastructure buildings in return for regular payments from the government.
George Osborne was concerned that taxpayer liability had risen to an unacceptable level (£144bn - according to the Office for National Statistics) and his PF2 Scheme will insist on a public sector stake of up to 49% and a director sitting on the board of each project.
“Equity is a more expensive way of raising money than debt and if the government increased its equity stake it is inevitable that the taxpayer will end up paying more money over the 10 to 30 lifecycle of these projects,” said Will Davies – the co-founder of Property maintenance and refurbishment company aspect.co.uk
“PFI has been a success in-so-much that it has paid for the construction or repair of 100 hospitals. If the private sector is making too much profit out of their investment that is the fault of the government negotiators who made the deals in the first place,” said Mr Davies.
Mr Osborne also announced that the government had renegotiated some PFI deals already in existence and had managed to reduce costs by £2.5bn over the lifetime of the contracts.
“I understand that the savings they have made are about £1bn more than they had hoped for but that is only a tiny dent in the 144bn overall public exposure,” said Mr Davies.
John Price, Hillgrove PR.
T. +44 (0) 20 3603 0366