Private Finance Initiatives (Hansard, 31 October 1995)

§ Mr. Curry

A year ago we announced a first package of measures under the private finance initiative, whose aim was to encourage joint ventures between local182W authorities and the private sector, and the disposal of surplus assets. We are continuing to implement and develop those proposals. Today, I can announce another set of changes to the capital finance rules to encourage further private sector involvement in the upgrading and, when necessary, replacement of local authority facilities. I am also announcing new research into the operation of joint public and private sector ventures.

The rule changes I am announcing will increase from 50 per cent. to 90 per cent. the usable proportion of receipts from the sales of county farms for two years from 1 April 1996, as announced in the rural White Paper; increase from 50 per cent. to 75 per cent. the usable proportion of receipts from the sale of educational assets for two years from 1 April 1996; increase from 25 per cent. to 50 per cent. from 1 April 1996 the usable proportion of receipts from the sale of shares in education companies; reduce the capital cost for authorities when they enter into "design, build, finance and operate" type contracts for the replacement or upgrading by the private sector of facilities such as schools, leisure centres and theatres; give authorities greater scope for financing the replacement of these facilities out of the proceeds of their sale, by a number of rule changes whereby authorities can take account of the cost of replacement assets in calculating set-aside, including relaxations in respect of the treatment of leased assets; remove disincentives to the dual use of such facilities by an authority and the private sector; reduce the capital cost of equipment replacement contracts, making it easier, for example, for authorities to use energy services packages which improve energy efficiency and reduce energy costs.

I hope to publish draft regulations embodying these changes within the next few weeks, and to lay them before the House, following consultation with interested parties, so that they can come into effect by 1 April 1996. In parallel with this consultation, I hope that further changes can be developed to extend the "design, build, finance and operate" concept to virtually the full range of local authority capital expenditure.

The new research into the working of the private finance initiative, commissioned by my Department and to be carried out by Coopers and Lybrand, will establish the nature and extent of authorities' involvement in joint companies through a questionnaire sent to all English local authorities. This will be followed by an investigation in detail of the role of companies in a number of case-study local authorities.

In addition to a report on the research findings, it is intended that the study will lead to the publication of a good practice guide, designed to help local authorities in developing private sector partnerships through the medium of companies.

Authorities' responses to the private finance initiative have been very encouraging. There is now much greater consciousness of what private finance can achieve, improving local authority facilities and services. The Treasury's private finance panel has worked with the local authority associations to prepare a consultation paper drawing authorities attention to the scope for such action. The setting up of the local government public private partnerships programme, with its own staff to help authorities find the most effective opportunities, is a welcome further step.

183W

My hon. Friend the Under-Secretary of State for Education and Employment is making a separate announcement about the specific implications for private finance in education. My right hon. Friend the Secretary of State for Wales is also making an announcement.