Beyond PFI – What’s The Alternative?
Continuing previous thread…..
The alternative to PFI is to fund public infrastructure using government’s reserves or money borrowed on the international markets, e.g. government gilts and bonds. Read more »
Category » PFI Waste
What’s Wrong with PFI
Continuing previous thread ….
Public Finance Initiative (PFI) projects are more expensive than using public money because:
- In a PFI project money has to be raised in the financial markets – the cost of private borrowing will always be more expensive (typically 1.5% above bank base rates) compared to government money raised with bonds and gilts.
- In a PFI project the private company will additionally need to make a profit. This profit is of course not applicable where projects are managed and funded by public bodies.
- Projects funded under PFI have higher arrangement and setup fees. PFI deals are complicated; considerable amount of money is needed to pay for arrangement, brokerage, insurance and consultancy fees which are simply not needed in conventionally funded projects.
NO PFI-LING MATTER
The Private Finance Initiative (PFI) was a Tory idea, which, in opposition, New Labour strongly opposed. But as soon as Labour came to power they fully embraced it and declared that PFI would become the means by which most of our new public infrastructure would be built. Everything from schools to hospitals to roads are now put under the PFI hammer.
Like some dodgy hire-purchase agreement, PFI allows the government to avoid paying up front for the cost of big building projects. Instead, private companies get to build and run the ‘assets’ and the taxpayer then has to buy back these services, usually over a 20-30 year period. But this isn’t like buying a house on a repayment mortgage, more like buying with one of those complicated endowment mortgages we were all encouraged to use back in the 80′s and 90′s. Read more »