Feature Story

An alternative approach

Dr Vince Cable, Shadow Chancellor for the Liberal Democrats, questions whether alternative models to PPP/PFI are needed.

How will you implement the efficiency agenda?
There is a great deal of cynicism about government efficiency drives. Rhetoric far exceeds outcomes as with the so-called Gershon savings. There are undoubtedly major potential economies in procurement and back office functions that lag behind good practice in the private sector. In the new world of real budget cuts in government departments ministers and top officials must lead drives for such economies. Decentralisation is a key step, with more functions devolved to local government and swathes of target setting and controls eliminated.

What contribution can the PPP/PFI sector make to reduce the budget deficit?
Not much. Unfortunately, many hospitals and schools now regret PFI contracts that are rigid, expensive and overcomplicated and lock them in by turning variable into fixed costs. We need to look at alternative public private sector models that seem to have worked well in Asia. There will have to be some messy renegotiations of bad contracts (eg. London Underground).

What are your key investment priorities?
Britain has, on most measures, poor infrastructure. There is a need for substantial investment in energy networks and storage, digital networks, public transport systems and new renewable energy.

Much of this investment won't come from government because of mounting public debt; bank lending and PFI have been hit, and stock markets are more interested in short-term returns. But there are vast sums of money in institutional investors – annuity funds in pension and insurance companies – looking for good but safe returns that are unable to find suitable investments in the UK as opposed to – say – US corporate bonds.

We want to create an infrastructure bank, with some pump priming, through public money (or assets), but essentially privately financed. The European Investment Bank or even the World Bank are plausible models.

Sometimes there is reference to a Green New Deal that links the recovery of the economy and employment to environmental priorities. That could well be a priority of investment by the Infrastructure Bank. Until the bank can be established, we would seek to maintain investment through a programme of public investment in social housing and home improvements centred on rehabilitated, improved empty property.

How will you make sure your government is going to deliver the expenditure that you have at your command?
There is a need for a new kind of civil servant with specialist training in project management and competence in financial management including private sector experience. We need a much better mechanism for the next spending round preparation and delivery. I see a lot of merit in the Canadian approach involving zero-budgeting, a new form of self-policing 'star chamber' operating within overall cost limits, 'road shows' to secure public buy-in and much more active involvement of parliament in expenditure approval and monitoring.

How would you encourage export of UK PPP expertise?
I wouldn't, as it is not the job of government.


Dr Vince Cable
Shadow Chancellor
Liberal Democrats

www.libdems.org