Bank of Scotland says larger contracts would encourage more firms into sector
The bank that is the biggest supporter of the private finance initiative has called for "much bigger deals" in social housing.

Bank of Scotland has lent £2.1bn to construct PFI schools and hospitals, with more possibly on the way for the eight social housing PFI pathfinders.

Director of housing finance Gabrielle Berring said the government would struggle to encourage more private firms to bid for contracts if larger deals were not offered. "The issue with PFI is the limited number of contractors that are willing to bid," she said. "It all comes down to costs and these contracts are very expensive to bid for just now.

"The majority of deals are just too small – they need to be bigger. There has been a lot of talk recently about the Treasury wanting to expand the use of PFI in social housing and regeneration.

"For example, looking more at the NHS LIFT model [which bundles public sector schemes rather than offering them to contractors piecemeal] would definitely encourage more contractors to get involved.

"We see this as a definite growth area for us and would welcome government action."

Berring's comments came as the Office of the Deputy Prime Minister confirmed that its proposal to alter the payment of PFI credits to councils was adopted on 1 August.

The issue with PFI is the limited number of contractors willing to bid. These contracts are very expensive to bid for

Gabrielle Berring, Bank of Scotland

Councils now receive a fixed level of government funding for the duration of the 30-year social housing deals. This protects them from interest rate fluctuations that could leave them having to make up any funding shortfall.

The ODPM will, however, retain the ability to alter the rate used to calculate the PFI credit at any time.

In response to calls from the sector, the ODPM has promised to continue paying major repairs funding to councils until PFI contracts are signed.

This has proved problematic in the past as such funding cannot be paid alongside PFI credits and has been stopped before the PFI deal was struck.

This can often be many months before pen is finally put to paper, leaving councils with shortfalls in their repair budgets.

Source

Housing Today