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 11: Learning from UK Private Finance Initiative experience

Michael Pollitt

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


Michael Pollitt The UK has been one of the leading countries in reforming the role of the state in the economy since 1979. The pervasive and long-running nature of the reforms in the UK make them an important source of case studies for the rest of the world. In the early 1990s the Conservative government launched the Private Finance Initiative (PFI) in an attempt to attract private-sector support for a wide range of government projects in such sectors as health, prisons, transport and defence. To December 2004 this initiative has raised around £43 billion of capital investment from the private sector and typically raises 15–20 per cent of the government’s capital budget each year. Total government commitments to future payments under around 670 contracts are estimated at £141 billion over 26 years.1 The current Labour administration has enthusiastically continued with policies aimed at increasing the involvement of the private sector in the economy, albeit with the occasional setback.2 At the beginning of its second term in office (in mid-2001) the government announced plans for an extension of private-sector involvement in the provision of government-funded health and education services.3 Indeed between the beginning of 2002 and July 2003 the total amount of PFI capital expenditure doubled.4 More radical forms of competition to provide public services are being experimented with, such as allowing foreign clinical teams to bid for contracts to provide hospital services and the PFI has become so mainstream that it is no longer thought of as ‘an...

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