Tories seek to end payments for PFI planning risk

A Conservative government may end the practice of paying PFI contractors to bear the risk that schemes will not get planning, in a move that would cut the cost of deals but could threaten the independence of the planning system.

At present, when PFI contracts are put together, the price includes money for contractors to cover the risk that a scheme may not get planning, and that the public sector may not fully own land it believes it has title to.

But it is understood that the shadow Treasury is discussing removing these criteria from the list of risks priced into PFI deals.

The move is part of the overhaul of the PFI model promised by shadow chancellor George Osborne. The thinking behind it is that, because land title and planning are both within the control of the local authority, it is unnecessary to pay the private sector to bear any risk on them.

However, the move would raise questions about the independence of the planning system and potential conflicts of interest, as at present planning departments operate independently from the council and have a statutory right to refuse projects it puts forward. Large, controversial projects such as waste schemes and renewables projects are particularly prone to modification or refusal.

Neil Rutledge, a director of accountant Grant Thornton, said: “If the Tories were to insist that the planners had to approve projects, it would give the private sector a lot more confidence. But they are against the [national] Infrastructure Planning Commission for being undemocratic, so would they be willing to cut across democracy at a local level?”

Rutledge also questioned how much of a saving would be made. He said: “Consortiums generally assume they will get permission so might price in for a delay but not for losing bid costs.”

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