SUMMARY OF REPORT CONTENTS

In the first three years since the local government PFI programme commenced in 1997/98, over £3 billion of capital investment has been approved, including council housing refurbishment, schools, police, fire, magistrates court services, care and respite homes, IT systems, leisure centres and waste management. 

Local Authorities in England and Wales employ over 2.1 million staff and spend £70 bn a year, which accounts for around 25% of public spending. There are over 21,000 elected councilors serving on 410 local authorities. Education is the largest service in expenditure and number employed, accounting for £20 bn in England and £1.2 bn in Wales. Education employs 360,000 staff. Social Services account for nearly £12 bn of expenditure in England and Wales and employ 200,000 staff. Social Service Departments administer children's and old peoples homes and support to people in their own homes.

Local Authorities raise their income in a number of different ways; council tax raised from council taxpayers and around 48% of expenditure comes from central government grants. The non-domestic rate, which is set by local government account, is 25% and the rest from local charges for services.

There has been a steady change from direct provision by the Local Authority to the private sector controlled by the local authority, while many functions have been taken away from Local Authorities and are now controlled by central government bodies.
PFI has not achieved the growth that has been expected of it and government expectations of the contribution towards the public services have yet to be met.

CCT has been replaced with Best Value, which requires the Authority to ensure that they are delivering services in an efficient and effective manner. The Government has required each Local Authority to undertake a review using the following principles

• Challenge why the service is provided at all

• Question the quality and the cost of the service

• Compare the service given with the best providers of a similar service

The Government is experimenting with a new pilot scheme - local public service agreements - which are negotiated between the authority and the Government. It will identify the extra contribution the authority is prepared to make over and above its requirements under Best Value to achieve key national and local priorities. In return, the Authority will receive greater freedom in the means of delivery. The process is designed to encourage the Local Authority to constantly raise its standing with some limited pump priming funding, which means that the authority can receive extra money from the Government.

PPPs are promoted by government to take advantage of private sector expertise to manage complex investment programmes. The intention is to introduce private sector investors who put their own skills and capital into the project - the public sector gets the benefits of commercial efficiencies and innovations and the public should receive better value for money.

There are upwards of 38 signed PFI projects involving almost 500 schools with a value of more than £1 billion. A further £1 billion has been allocated to projects in various stages of development. The Government has increased the amount of PFI credits for schools from £35 million in 1997-98 to a planned £850 million in 2003-04, with education by far the largest sector of PFI funding in the local authority sector.

An increase in housing investment has also been announced and by 2003/04 annual capital investments in housing will be £4 billion compared with just over £1.5 billion in 1997/98. Highway Maintenance has experienced great changes over the last 30 years. CCT was introduced into Highways work in the early 1990s and local authorities were obliged to separate the client function from the direct labour organisations.

Partnerships between the public and private sectors have been used extensively by Social Services Departments for many years. Local Authorities have used the private sector to deliver services, and have also used the voluntary sector. There has also been a progressive move in other areas like Planning and Leisure Services to seek partnership agreements with the private sector, and this has also been extended to the Fire and Rescue Service.

The process for privatising services like refuse collection and highway services which are tangible, has moved ahead at a pace, and it would seem that all parties are comfortable with the working relationships. There have been also moves to involve the private sector in services like the management of housing benefits and some IT projects, which have generally been less successful.

Participants in PFI projects complain about the length of time involved from the initial OJEC notice until financial close. Although moves have taken place which are designed to shorten the length of time e.g. standardisation of procedures and documentation - nonetheless the more complex projects are still requiring considerable amounts of time before financial close, for example over two years. The delays and uncertainties involved add to the costs involved and make it less attractive for constructors.

Public Private Partnerships are at the heart of the government's attempts to revive Britain's public services and they are keen to expand the range of PPPs which are regarded as the best way to secure the improvements in public services within a relatively short timescale.

There will be a continuing move to PPP/PFI schemes in both central and local government services, but the majority of public works will remain funded by central government funding and local taxes.