UK: PFI Bulletin

Last Updated: 6 October 1999

The Bates Report - Mark II

After much delay and speculation as to its contents, Sir Malcolm Bates' second review of the Private Finance Initiative was published on the 22nd July 1999 alongside the Gershon Report on government procurement.

As was widely suspected, the report contained proposals for a new PFI body to help fund the costs incurred by public sector parties in establishing and signing PFI projects. This body is to be called Partnerships UK rather than "UK Capital", the name previously touted for the organisation. Sir Malcolm believes that PFI expertise needs to be centralised to consolidate and strengthen PFI co-ordination.

The Main Findings

The review has found that there is still insufficient evidence of deal making skills in departmental PFI units and that such units lack the essential skills for creating effective partnerships. Consequently, a long term requirement for central PFI experience remains, something the Treasury Taskforce (TTF) was initially supposed to tackle in two years.

Sir Malcolm concluded that it was impractical to extend the life of the TTF or to create a fee earning agency as it would be difficult to retain staff of the required calibre for these bodies.

Partnerships UK (PUK)

It is intended that PUK will work with both the private and public sectors to address weaknesses in the current process. Although PUK will be a private sector body, it is to have a strong mandate to address weaknesses in the public sector. Essentially, it is intended to make available to the public sector expertise which until now only the private sector has been able to afford.

PUK is expected to deliver value for money for public bodies and to inject a detailed examination of practical considerations into the decision making process, driving forward the conclusion of deals.

It is stressed in the report that PUK is to have no monopoly position nor a guaranteed market - it will have to win business. This is presumably intended to avoid the legal challenges that might have been made against the Government based on EU competition law that were threatened prior to the announcement.

The Government is arguing that by using PUK to create a better flow of well structured projects, private sector costs will be reduced.

PUK will be established as a plc and as the majority interest will be in private hands it will be off the government's balance sheet. However, the report states that the government has some degree of control as it has the right to appoint a minority of non-executive directors.

With regard to the funding of PUK, the report specifically states that the government will inject the minimum amount of cash necessary to successfully launch PUK, though it is not expecting to contribute more than Ł20m.

Contrary to pre-publication speculation, the report states that PUK is not a bank and its main role will be project management and to provide development funding where it is necessary to get the deal off the ground. PUK "will, where necessary, provide a range of financial products ... in the early stages of the procurement process, which enhance ... existing flows of private finance."

However, at no point does the report identify how PUK will recoup these outgoings. One of the key questions left unanswered is whether PUK will charge fees or take equity stakes in projects.

Perhaps one of the most interesting proposals, made possible by the creation of such a central body, is the envisaged bundling together of smaller projects, likely to be from local government, which individually would not have been a viable investment for public money.

The Relationship Between PUK and the OGC

The Gershon report on public procurement recommends the establishment of the Office of Government Commerce (OGC), to be a distinct organisation within the Treasury (which will encompass the TTF).

The OGC will centralise government procurement (although it will not be involved in defence procurement) so as to establish a consistent approach which will allow changes to procurement methods to be driven through.

It is recognised that PFI provides a higher sustainable level of investment in public services and so it is intended that the OGC will introduce the PFI into the core procurement options open to public bodies.

The Future of the TTF

Rather than the TTF being disbanded, as was widely predicted, it is set to continue as part of the OGC. It will retain responsibility for PFI policy and advice and will chair the project review group responsible for prioritizing the allocation of PFI credits to local authority PFI projects.

What Happens Next?

A Steering Group will be formed prior to the raising of private finance, which is expected to begin its work in March 2000.

The Steering Group will include representatives from Abbey National Treasury Services plc, Barclays Bank, Halifax, Prudential, the Royal Bank of Scotland and the European Investment Bank.

The raising of private sector capital will be carried out on a competitive tendering basis.


The Report contains some interesting recommendations, though it does not take the bold step of establishing an investment bank - at least not at this stage. The omission of details as to how PUK will be paid could be seen as a loophole to be filled by equity stakes, once the government has had the chance to convince more of the private sector that this is a good thing.

A number of other questions remain unanswered : who will be allowed to invest in PUK?

The market will welcome the continuation of the TTF as a policy shaper (and, presumably the provider for guidance). This will ensure that one of the mainstays of the PFI process will remain. However, it seems likely that most - if not all - of the deal making skills (in the shape of the projects team section of the current TTF team) will transfer into PUK, leaving an exclusively "civil service" TTF which could lose touch with ongoing deals.

The changes should be seen in the context of the first Bates Report produced in the Summer of 1997, following which the Treasury Taskforce was established and (by common consensus) substantial strides were made in the development of a sound basic model for the procurement and delivery of PFI projects.

At least the delay - which has been creating a damaging climate of un-certainty in the PFI market place - is finally over.

PFI at Hammond Suddards

Our team of PFI specialists will be happy to discuss issues arising from this Bulletin (or any other questions you may have as to PFI/PPP projects).

For further information please contact David Hickman, Tel: +44 20 7655 1000

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.