Government axes Brum's £2.7bn PFI deal in shock 'betrayal'

Dominic Browne

Birmingham City Council's leader has accused the Government of 'betrayal' by axing the authority's £2.7bn highways Private Finance Initiative (PFI) contract, in a move that could lose the authority more than £500m of roads investment.

A council spokesperson told Highways that ministers have withdrawn their £50m a year contribution for the PFI contract, which would have run from 2024-2035, causing the deal to collapse.

Under the original arrangement - only confirmed last month - Birmingham would have put in £50m annually and the Government a further £50m.

The Government has now told Birmingham that it will only provide its share until the end of the current Spending Review period (2024/25), Highways understands.

This is expected to be delivered through an uplift to the West Midland Combined Authority (WMCA) CRSTS settlement.

After that period, the council could fall back on an interim arrangement with Kier, under which the authority maintains its own £50m annual investment but receives none of the Government's support.

Cllr John Cotton, leader of Birmingham City Council, said: 'The Government has betrayed Birmingham to the tune of over £500m.

'This will have a negative impact on every single person in our city. This is a disgraceful decision that comes at the end of four years of careful negotiation and work from the council and our partners and shows the government’s contempt for Birmingham.

'We will continue to fight for the funding that is rightfully ours. More than ever, we need a Labour mayor to stand up for our region, and a Labour Government that will keep its word to local authorities.'

Cllr Liz Clements, the council's cabinet member for transport, said: 'This decision risks transport chaos in Birmingham. Our ability to complete the essential works required to ensure our residents are safe on the road will be compromised, and this is a huge blow to our ambitious Route to Zero programme, as we will not have the funds needed to maintain our cycle network or give better priority to buses.

'Whether you prefer to walk, cycle, drive or take the bus, your ability to travel safely around our city will be hit by this short-sighted decision from the Tory government.'

Early last month, Birmingham Highways Limited (BHL) had announced Kier as the preferred bidder for the £2.7bn Birmingham highways maintenance and management PFI contract.

The contract was subject to Government approval, with the services planned to commence on 1 February 2024 and continue until June 2035.

BHL worked with Birmingham City Council and the Department for Transport (DfT) to restructure the Birmingham Highways PFI contract since 2019 with the procurement process beginning in April 2022. Kier maintained Birmingham’s road network since April 2020 on an interim basis.

The PFI contract had been dogged by problems for over a decade. A previous incarnation, starting in 2010 with Amey Birmingham Highways Ltd (ABHL), ended in a bitter legal dispute over performance. The council won its legal case at the Court of Appeal in 2018.

In June 2019, Amey reached an agreement with stakeholders to pay £215m to terminate its involvement in the PFI contract.

The Department for Transport has been approached for comment.

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