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Local government pension funds have issued ‘hands-off' warnings to public bodies, desperate to use retirement cash to prop up stalled PFI projects. Senior sources this week revealed several large funds within the £100bn Local Government Pension Scheme (LGPS) had rebuffed approaches from councils hoping to encourage schemes to invest in privately-financed school-building projects. Partnership for Schools, the government body responsible for the £55bn schools programme, has asked councils for emergency investment into PFI schemes because private funds have dried up. At least two large, northern-based LGPS funds dismissed the idea immediately, because they feared a conflict of interest between councillors' duties. Councillors on a town hall pension committee have a fiduciary duty to local taxpayers for their decisions, while pension funds have a duty to represent their scheme members. LGPS funds feared councillors would be unable to show decisions to approve PFI investments adequately balanced these interests. One source told The MJ: ‘It could leave councils open to legal challenge by any member of the LGPS fund involved.' Legal challenges would emerge if any project collapses due to a contractor going bust during the credit crunch. It emerged last week that around 1,000 PFI projects worth £10bn have stalled, because contractors and suppliers cannot access sufficient credit. A PFS spokesman said: ‘We have been approached by local government pension fund advisers… to explore whether pension funds could provide an additional source of funding.' Chris Wilson, executive director of 4Ps, local government's private-finance adviser, said other options would also be explored. He said: ‘We expect to see a growth in the use of hybrid public-private partnership methods which retain the advantages of PFI, such as a mix of prudential borrowing with project finance, and private investment and prudential borrowing with milestone payments and PPP/PFI contract features.'

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FINANCE

Pension funds reject calls to bail out PFI

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