The Challenge of Public–Private Partnerships

The Challenge of Public–Private Partnerships

Learning from International Experience

Edited by Graeme A. Hodge and Carsten Greve

The aim of the book is to investigate how PPP reforms function in comparison to the more traditional methods of providing public sector services and infrastructure and who typically experiences the successes and failures of these reforms.

Chapter 10: The Private Finance Initiative or the public funding of private profit?

Jean Shaoul

Subjects: economics and finance, public sector economics, politics and public policy, public policy

Extract

Jean Shaoul As with many public policies, the rationale for the British government’s Private Finance Initiative (PFI) and Public Private Partnerships (PPP), known elsewhere as design, build, finance and operate (DBFO), build, own, operate and transfer (BOOT), build operate and transfer (BOT), partnerships or concessions, has changed so much over time that even its proponents have described it as ‘an ideological morass’ (IPPR, 2001). It was originally justified as providing the capital investment that the public sector could not afford, the macroeconomic argument. Later, the UK government claimed that PFI would deliver greater value for money (VFM) over the life of the projects because the private sector firstly is more efficient than the public sector and secondly assumes some of the financial risks (and costs) that the public sector would otherwise carry, the microeconomic argument. More recently, the government has justified PFI on the basis that it delivers assets to, for example, time and budget (Treasury, 2003). The shifting rationale may imply that, like the various justifications given for the war against and occupation of Iraq, the promises may prove to be a chimera. Introduced by the then Conservative government in 1992 (Treasury, 1993), PFI was revitalized and rebranded as Public Private Partnerships (PPP), an umbrella term that includes PFI, by the incoming Labour government in 1997. While privatization was the preferred policy measure for reform of the state owned trading enterprises, partnerships are playing a key role in the transformation of those public services that...

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