Much of the growth of the
UK leasing industry was driven off the back of tax and accounting
benefits. Many of these benefits have fallen away, but to many UK
asset users leasing is still perceived as a financially structured
product. Emerging from this deep recession, leasing needs to be
refocused and given new purpose; within an asset management
service, that purpose could be delivering public sector spending
reductions.
Financing of public sector assets
by leasing has been historically low, and private finance
initiative (PFI) arrangements almost non-existent. Public sector
spending is governed by HM Treasury procurement and financing
rules. There are pockets of concentrated experience such as NHS
Supply Chain, but the general use of direct leasing in the sector
is limited.
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Achieving effective public sector
spending reductions is a major topic in the UK. There are two
routes to reduce public spending: the first is to cut inputs
(budget allocation and funding), and the second is to reduce
required outputs.
The first route is the most
traditional method in implementing public sector cuts. It is not an
efficient process, but it is quick. Cost-cutting tends to be fairly
arbitrary, based on ease of delivering cost-savings, and invariably
leads to inadequate services and utilisation of assets.
The second route, based upon
outputs, allows for a focus on key services most appropriate for
the public sector to supply. The remainder of services are then
available for the private sector to offer. An output approach
requires the public sector to concentrate assets and resources to
deliver key services in a cost-effective manner and allows specific
investment in assets that can deliver efficiencies.
The public sector regularly uses
competitive tendering and PFI initiatives to outsource public
services to private contractors, with payments usually dictated by
delivery and performance targets. The performance of such
outsourcing projects is considered mixed. In many cases, the public
sector loses control and knowledge of the delivery of key
outputs.
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By GlobalDataLeasing as a product and platform
for asset management enables the public sector to retain the skills
and knowledge to deliver key services, while effectively
outsourcing the procurement of assets.
The combination of asset management skills with an asset finance
product could enable leasing businesses to work with the public
sector to provide a more effective and efficient reduction in the
level of public sector spending, rather than the alternative of
enforcing arbitrary and painful cuts.
George Lynn, chair of asset
finance division, FLA, and CFO, Angel Trains Group
