Private cash dash 'could go further'

6th December 1996 at 00:00
Colleges must review borrowing for building projects, say ministers.

Colleges have responded well initially to the Private Finance Initiative, but have some way to go, according to education and employment minister Robin Squire.

A conference in London last week organised by the Further Education Funding Council looked at the role of PFI in further education.

The conference - together with another to be held next year - aimed to increase support for an unpopular policy.

Mr Squire said that PFI was making good progress in education, with more than 30 Pathfinder projects in schools, colleges or universities. Pathfinders are projects with PFI potential, and 10 have been announced in the FE sector.

More than Pounds 140 million of loan finance has already been secured, the conference heard.

He said that PFI was both a pound-multiplier and a pound-improver. "Because PFI multiplies colleges' purchasing power, we anticipate a steady and sustained increase in colleges' capital investment under PFI. For that reason, it no longer makes sense to put a figure on how much capital investment we want to see in the sector. But be in no doubt, we want plenty."

Mr Squire said the Government anticipated the private sector would play an increasing part in the funding the public sector. Education should look to potential investors. "The market is potentially huge. The college estate, for instance, has a replacement value estimated at Pounds 7 billion. And there is scope for all types and sizes, ranging from services such as security through small-scale initiatives such as nursery provision to multi-million pound university redevelopments."

He warned colleges that PFI was not only a route to better facilities, it was also a way to greater efficiency. "Inefficient facilities are an unmitigated menace. They waste college money. And they cheat college users, because they deprive them of something better. Yet billions of public capital is tied up in those facilities. I wonder if all colleges are doing enough to stand back and systematically review - with FEFC help and guidance where required - their use of those billions.

"The FE sector needs to be built and re-equipped. That will not happen unless colleges rebuild and re-equip themselves. And that will not happen unless colleges can attract private sector expertise and resources. And that, in turn, will not happen unless colleges embed PFI in their strategic thinking."

He told potential investors that it would be inconsistent with college autonomy if the Government had to underwrite decisions they made. Colleges should build their own track record of probity by prudent use of their powers. Investors should judge individual colleges on their merits. "With more than 450 colleges in the FE sector, generalisations about their credit-worthiness can only be misleading," he said.

Roger McClure, FEFC finance director, said the sector was used to living off scraps, but now wanted to establish itself.

David Parkinson, director of WS Atkins Facilities Management, a PFI consultant, said: "PFI focuses people's minds. It encourages a realisation of asset values. It helps to focus on efficiency savings. It demands a commercial approach and moves towards partnering. Risk transfer helps to focus on who is best to take that business forward. It will survive a change in government, " he said.

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