Prime Highlights
- Regulator of the UK warns that value-for-money hospitals, schools, and roads are becoming public assets again due to mismanagement of PFI contracts.
- MPs call for greater control over risk-sharing, project transparency, and contracts to protect the taxpayers.
Key Facts
- Over £136 billion of PFI payment by 2052–53 on over 650 contracts being held by the public.
- As much as 50% of PFI contracts are to be renewed over the next 10 years, and potentially leave quality gaps in infrastructure.
Key Background
The UK government is faced with a strategic challenge in beginning to inherit publicly funded infrastructure projects expanded by long-term Private Finance Initiative (PFI) arrangements. The Public Accounts Committee (PAC) stated that the majority of the assets, such as schools, hospitals, and transport buildings, are being returned in poor condition and there are doubts about long-term value for money to taxpayers and delivery of services.
PFI was initially meant to be a way of borrowing private sector funding to support public infrastructure without the creation of short-term public debt. The model has, nevertheless, been faulted on cost, duration of contract length, and inflexibility. There have not been any new PFI deals signed since 2018, though some still in progress are ongoing and go into the 2050s. The PAC pointed out that almost half of these contracts are due to expire over the course of the next decade, with a significant risk if proper handback standards are not put in place.
A key worry is that many public authorities do not have the resources or expertise to deal with the end-of-contract processes well. This leads to infrastructure returning in a state of neglect and having to spend public money repairing something that should have been repaired by the private contractors. The collapse of big PFI contractors like Carillion has also highlighted the issues in the system, where public services were put into crisis and the public had to make up the deficit.
These risks need to be met by the PAC and have proposed an official risk-sharing framework, enhanced contractual transparency, and creating a central PFI deal database. They also urge the Treasury to publish a clear pipeline of future public schemes so as to reassure the private sector but provide the public sector sufficient control. Unless drastic reforms are introduced, the UK will still spend costly mistakes on infrastructure delivery yet again.