Feature Story

Private principle, public benefit

Shadow Minister for the Treasury David Gauke explains how the principle of private financing can have benefits for public sector delivery.

How will you implement the efficiency agenda?
First things first: the economy is not in the place that it needs to be. We face a massive peacetime deficit and a fragile recovery. What is needed is a new economic model that gets us growing again without returning to the debt-fuelled expansion that led us into this mess.
Over the first decade of Labour's rule from 1997 to 2007, according to the Office for National Statistics, quality adjusted public sector productivity shrank by 3.4%. Over the same period, productivity in the private sector of the economy grew by over 30%. Even in the services sector, it grew by more than 20%. Our efficiency agenda is about bringing productivity gains in the public sector up to par with those achieved in the private sector.

Efficiency means obtaining maximum value for taxpayers' money. It will be driven by greater transparency of public spending information; clearer incentives to save money and ways for departments to share the benefits of savings; new incentives to use assets efficiently; a strengthened role for financial managers; new ways to investigate wasteful spending in government; and a specific duty of care on senior civil servants in the spending of public money.

What contribution can the PPP/PFI sector make to reduce the budget deficit?
The constraints on public spending have never been tighter. The UK will have a budget deficit of 12.6% this year, the worst in the developed world, and unless we show a credible route out, we face the risk of a credit rating downgrade, meaning higher mortgage and borrowing costs.
The government's models of private financing are flawed and discredited, often because they have been used to keep projects off the government's balance sheet. But the principle of private financing can have benefits for public sector delivery. Long-term decisions about investing, financing and pricing can be taken without being caught up in the intensely political process of annual spending negotiations.
We need a new system that doesn't pretend that risks have been transferred to the private sector when they can't be, and which genuinely transfers risk when they can be.

What are your key investment priorities?
Our priority is infrastructure that can get Britain growing again.

How will you make sure your government has the capability to deliver the expenditure that you have at your command?
A contract will only work if it has been correctly designed and will only be as good as the managers running it. But there is currently a frustration over a culture that sees officials encouraged to be generalists rather than specialists, a constant churn of staff so that almost no-one who is involved in a project at its inception will be there at completion, and the management of contracts worth eye-watering sums of money by relatively junior officials.

A competent government must strengthen the management and oversight of public private contracts, must entice people from the private sector to join the procurement team and must ensure that the process itself is focused upon maximising the value to the public sector of involving the private partner.

How would you encourage export of UK PPP expertise?
PFI has gone down the wrong track but in its early years the model was one that encouraged economic liberalisation across the world. If we get it right again in the UK and are at the forefront of innovation, the market for UK expertise overseas will be huge.

David Gauke MP
Shadow Minister for the Treasury
The Conservatives
www.conservatives.com