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PFI in local government

An Introduction to PFI in Local Government

The Private Finance Initiative (PFI) is one of a range of initiatives introduced by the last Conservative Government, aimed at increasing private sector involvement in the provision of public services. The Labour Government has sought to 'reinvigorate' PFI by streamlining the process and concentrating on 'viable' projects.

Under PFI, private companies may design, build and finance the asset, such as a new hospital, school or housing, and the staff may transfer from the public sector to the private sector company to deliver the service. The public body has to pay an annual fee to the private company under a long-term operating contract for the services.

UNISON's Local Government Service Group Executive has recently reaffirmed UNISON policy to continue the campaign against privatisation and for the direct employment of staff providing public services.

UNISON believes that PFI is a more costly way of providing public services than direct borrowing by the public sector. UNISON is also concerned that transfer of staff to facilities-management companies has led to a deterioration in terms and conditions and the establishment of a two tier workforce in the public sector.

UNISON's national campaigning and lobbying has led to key legislative changes in the ways that PFI, CCT and Best value are operating. There have, for instance been amendments to part two of the Local Government Act 1988. Now Local Authorities can now take account of "workforce matters" during contracting discussions with potential private sector providers, and a recent draft circular produced by the Office of the Deputy Prime Minister entitled "Best Value and Performance Improvement" contained a number of key proposals relating to how workforce matters should be handled in contracting situations , for instance the externalisation of services under a PFI contract. In the Draft Circular:

• Local authorities will be under a statutory duty to consult recognised unions, employees' associations, and staff throughout the best value process with full disclosure of information on all matters affecting the workforce
• Contractors should also have policies which ensure good communication and consultation with the workforce on key issues following a transfer
• New legislation making statutory within local government the provisions in the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector and the annex to it, A Fair Deal for Staff Pensions
• A new Code of Practice on the treatment of new recruits working on local authority contracts alongside transferred staff. The Code is to be supported in statutory guidance and written into individual contracts between local authorities and contractors
• Under the Code the service provider will be required to offer new recruits :
  • Membership of the local government pension scheme or;
  • Membership of a good quality employer pension scheme. For a defined contribution scheme the employer must match employee contributions up to 6% wished or;
  • A stakeholder pension scheme under which the employer will match employee contributions up to 6%.

The Government has also conceded a key matter on which UNISON has long campaigned, the duty to consult staff and trade unions. At paragraph 38 of the draft circular it states that "in reviewing functions, authorities must consult recognised unions and employees' associations, and staff engaged in that function.

Code of practice on workforce matters in local authority service contracts (Annex C)

The Code covers staff who were transferred from a local authority to a service provider (contractor) and also staff originally transferred out from the local authority as a result of outsourcing who are TUPE transferred to a new provider under a retender of the contact.

The Code will be contained in contracts between local authorities and private contractors or other service providers. It states that contractors who intend to cut costs by driving down the terms and conditions for staff, whether for transferees or for new joiners taken on to work beside them, will not provide best value and will not be selected to provide services for the Council. The Code also states that in its contracting out of services, the local authority will apply the principles set out in the Cabinet Office Statement Of Practice Of Staff Transfers In The Public Sector and the annexe to it - "A Fair Deal For Staff Pensions".

While the enforcement measures contained in the guidance are very weak, the new code will at least provide a minimum standard that would require authorities to ensure equal employment treatment of all staff - transferred or new starters on outsourced contracts.

Some UNISON branches have negotiated far better contractual clauses for transferred and new staff to tackle the two-tier workforce and protect the terms and conditions of transferred staff through "TUPE plus" contractual clauses.

Despite these changes there is still a genuine concern that PFI will result in worse conditions for new starters as compared to existing transferred staff. There is also the fear that the public sector will lose control over assets and service provision. The real danger is that under PFI the future provision of public services will be determined by what the private consortium wants rather than what the public need.

To answer these problems UNISON has developed a twin track approach to tackling the threat of PFI that involves:

• Campaigning against PFI nationally and locally, but
• Getting the best deal for members where PFI projects go ahead.

Further detailed information about both UNISON policy on PFI and campaigning advice contact the Local Government Service Group at UNISON H.Q. Mabledon Place. The Local Government Service Group provides newsletters, information and circulars on the PFI and are a source of information and advice to branches. A useful port of call for information and advice is the local government service group website. You can also look in the Positively Public Unit website for information about the campaign against PFI and privatisation in the public sector.

Further detailed information about both UNISON policy on PFI and campaigning advice and materials are available from Local Government Service Group and the Positively Public Campaign Unit at UNISON H.Q. Mabledon Place. The PPC Unit are leading UNISON's campaign against both PFI and Privatisation in the public sector and are a source of information and advice to branches.

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