Edited by Graeme A. Hodge, Carsten Greve and Anthony E. Boardman
Chapter 14: The UK’s Private Finance Initiative: History, Evaluation, Prospects
Mark Hellowell Introduction The Private Finance Initiative (PFI), under which groups of private companies finance the design, building and maintenance of new economic and social infrastructure, is the dominant method of large-scale public investment in the UK. As of April 2009, contracts for 641 PFI projects had been signed between public authorities and private sector consortia, with a nominal capital value1 to the public sector of £63.8 billion (HM Treasury, 2009a). Privately financed projects have been commissioned by every department of state and operate in most areas of public service, with transport, healthcare, defence, education and waste management among the most important sectors. This chapter provides an account of the PFI’s political and economic origins, a description of the policy’s size, scope and significance within overall public capital investment, a review of the evidence on the PFI’s cost-efficiency (or ‘value for money’), and an analysis of the policy’s medium-term prospects. Politico-economic origins – from New Right to Third Way? The PFI was introduced by John Major’s Conservative government in the autumn budget statement of 1992. This began a five-year process of legal and bureaucratic reforms intended to promote the use, by the public sector, of the design, build, finance, operate (DBFO) model for the delivery of capital investment projects. Underpinning the government’s move was a mix of philosophical, financial and political considerations that combined to make PFI an attractive policy. Philosophically, it suited the party’s neoliberal agenda, providing a means of growing the private sector’s role in parts of the public...
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