During the public question time of this week’s Cabinet meeting, Newport resident Steve Goodman raised the subject of Highways PFI.
His question followed a scathing National Audit Office Report on PFIs released at the end of last month.
He asked, “How much longer will it be before the Isle of Wight Council gets on board and decides that it’s not such a good idea for us after all?”
“Committed to implementing manifesto decision”
Cllr Pugh responded saying the Isle of Wight Council is committed to implementing manifesto decision outlined in 2009 in the relation to PFI.
Cllr Giles, the Cabinet member with responsibility for Highways, responded to Mr Goodman’s questions, stating clearly that the council have no intention of stopping the project.
He went on to say, “The recent report from NAO contains valuable feedback from those projects with contracts closed during the height of the financial crisis in 2009/10.
Cabinet accepts finding of report
“The Cabinet accepts the findings of the report and welcomes them, as they highlight the action we’re already taking to avoid problems of this nature. Steps have been taken to ensure procurement of the PFI contract to the highest possible standard.
“The PFI team already aware of – and engaged in – current developments in the PFI sector and our contracts are in line with the recommendations of this and other NAO reports on PFI projects.
He went on to highlight some ‘key points’, “Some PFI deals concluded during the financial crisis did not offer value for money. We also need to consider context around those schemes. The financing terms for long-term borrowing rose rapidly during 2009/10 and those who made the decision to conclude PFI deals during that difficult period admitted higher than expected borrowing rates, which had impact on value for money on those projects.”
Contract only signed when acceptable financial terms are met
Cllr Giles attempted to assure the public by going on to say, “We are aware of the banking terms that was included in those projects and are already in negotiations with the bidders on our project to achieve the best financing terms for our contract.
“The Isand PFI contract will be signed only when we have acceptable terms, we will not allow our contract to be concluded unless the financing terms are favourable.
The secondly point Cllr Giles raised was in relation to value to money.
He said “General guidance is that the PFI solution needs to be 10% cheaper than comparable public sector schemes. In the case of the Island Highways PFI, the comparative indicated is around 14% cheaper to deliver the same services using the PFI approach.
“Neither this council nor the Government will be pursuing the Highways PFI if it did not clearly demonstrate value for money for the tax payers at a local or national level, so we should not be recommending that the Highways PFI project ceases.”
Image: Lord Enfield under CC BY 2.0
