Private Finance Initiative - a good deal for the public purse or a drain on future generations?

The Private Finance Initiative (PFI), introduced by the Conservatives in 1992, has been enthusiastically embraced by the Labour government, with projects worth pound 12 billion (capital cost) signed between 1997 and 2000. The charge to the public sector includes the capital cost and a charge for the service, with the resulting 'unitary payment' charged over the life of the contract which may extend beyond 20 years. PFI is thought to have advantages over traditional procurement, including risk transfer, innovation and value for money. This article explores these advantages in some depth and concludes that the advantages of PFI may not be as significant as some proponents suggest.