3.5.3.5   Private Financing of Public Infrastructure Projects

(This is an archived page, from the Patterns of Power Edition 3 book.  Current versions are at book contents).

British governments decided that they could proceed more quickly with major capital projects, such as new transport infrastructure, if they allowed some or all of the funding to be privately provided by the contractor.  They then paid a long-term rental (and profits).  These contracts were described in a BBC article, What are Public Private Partnerships?, and included risk-sharing ‘Private Finance Initiatives (PFIs)’.  

Following concern about whether PFIs were delivering value for money for the taxpayer, Parliament’s Public Accounts Committee published a report: Private Finance Initiatives inquiry.  It found that “Public Private Partnerships were relatively expensive, with initial finance for projects costing up to 5% more than publicly-funded initiatives”; in October 2018, the government announced that it would no longer use PFIs.  

An extended obligation to pay rent for a project is a form of debt that avoids being classified as such – and thereby, for the UK, avoided criticism under the EU’s ‘Excessive Deficit Procedure’ rules which enforced budgetary discipline (Document 12008E126).  Given that governments can normally borrow more cheaply than private companies, it is hard to avoid the conclusion that financing projects through PFIs was driven by political expediency rather than offering the taxpayer the best value for money.