The head of the private firm taking over control of the 2,500km of roads in Birmingham has said increased private involvement is “inevitable” in the public sector as authorities look to cut costs.
Last month public support firm Amey sealed a £2.7 billion, 25-year private finance initiative (PFI) deal to manage and maintain roads in the city for Birmingham City Council – the biggest deal of its kind in the country.
Amey has taken on about 300 council staff from the highways department – and will be recruiting nearly the same number again in coming months.
Amey chief executive Mel Ewell said: “I think we are going to be seeing more services outsourced,” he said. “There is an inevitability about it.
“The mantra now is that while times were good there was a lot of money to invest in new capital spend. But now it’s all about sweating the asset, making sure the asset is used to its optimum.
“If you look across the spectrum of all the things we do then there must be ways in which Amey will have an economy of scale or understanding of the structure that will enable us to do more with the council.
“Not everything can be outsourced, but there is much in the UK that is a possibility that has yet to be outsourced.”
He added that local authorities and the private support sector needed to become more creative in looking at ways to work together as times became harder for public spending. He said the Government was even considering whether it was appropriate for private companies to own road routes in the UK.
Amey will be maintaining and upgrading the whole of Birmingham’s road network under the new contract. This includes looking after about 100,000 street lights, as well as footways, bridges, street lighting and traffic signals, and things like safety barriers, seats and trees.
The firm already employs some 1,500 people in the West Midlands, and at the end of last year moved about 250 employees into its new international design hub in Colmore Plaza, and said another 250 would be joining them over the coming years.
PFI deals between local authorities and the private sector first became popular about 15-20 years ago, but the number of contracts mushroomed under the encouragement of the Labour government. They have been accused of being used to distort spending figures and hide capital investment from public balance sheets.
But Mr Ewell defended the record of the private sector in public work, and said he thought a move to private employers could bring more out of workers.
“The PFI programme that’s been running in this country has been a world beating success and I think it’s something this country can be proud of.’’
* Increased collaboration with the public sector is the only feasible way public services can see capital investment, the corporate director of resources at Birmingham City Council said.
Paul Dransfield said the Amey contract would see investment and improvement work done at a level that the council’s own budget could simply not have coped with.
He said: “The key change is that for years and years we have been using council resources to maintain the highways and relied on government capital funding to improve things or deal with major changes.
“The major benefit from the PFI contract is that in support the Government puts in money. The simple maths of it is that this project is worth 2.7 billion over 25 years. Our budgets if they were frozen where they are would cover 1.5 billion of that.
“We were struggling to keep the highways going – this will solve that issue.”
The council will be paying the Amey contract on an annual basis, with payments linked to inflation and funded from the government grant and the revenue budget. Mr Dransfield said capital spending in the public sector was coming under more and more pressure, and private companies were able to access the finance on the open market.
He added: “The key thing is what we all want from any form of contract is to be able to manage our assets. You want to have an asset and be able to look after it. The PFI system has been able to do that. The old funding mechanisms haven’t been able to do that for us.”
He said there were many other services that would benefit from private involvement, with projects related to waste and recycling a key opportunity for outsourcing.