More delays to housing PFI scheme

8.36.00am BST (GMT +0100) Mon 10th May 2010

Wiltshire Council's Private Finance Initiative to build 400 houses for rent has been in development for seven years and has not yet built a single house.

A contract was meant to be signed in March with Silbury Housing Ltd (SHL), a consortium led by Sarsen Housing Association in partnership with Barclays Private Equity and Persimmon Homes.

In November 2009 the WC cabinet agreed to proceed with a reduced scheme of around 350 homes in total, on a phased basis, with approximately 242 homes being provided in Phase 1. It was also agreed to submit a final business case with the intention of signing the PFI contract by the end of March 2010.

The project has however been seriously delayed, due to uncertainty about land ownership and difficulty in commercial negotiations with SHL.

Persimmon are demanding a higher than expected price for their land to compensate for not being able to develop the sites commercially if they're used for PFI, so the cost per house as built comes out at £156,000. The council believes this is value for money, but the risk is that the government may not agree and might withdraw their offer of financial support for the scheme.

Since then the scheme has run into more trouble with the identification of legal restraints on two parcels of land intended to be developed. These are at Paxcroft Mead Hilperton and Broad Street Trowbridge. In April a report went to the WC 'cabinet' recommending appropriation of the land to over-ride any potential problems. This would take away the rights of anyone with an interest in the land to block the scheme, but would allow compensation to be paid if such people came forward.

Because the decision could be challenged in the courts a three-month period has to be allowed for any such appeal, so the PFI contract could not now be signed before July.

A further danger is that a new government may pull out of the horrendously bureaucratic PFI system.

The Council's total set up costs are about £2 million, of which £1.3 million has been spent to date and is irrecoverable regardless of whether the project proceeds. A budget of £350,000 has been identified for 2010/11. It remains a distinct possibility that the PFI scheme will fizzle out without managing to put two bricks together.