Failure of the private finance initiativeBMJ 2018; 360 doi: https://doi.org/10.1136/bmj.k311 (Published 25 January 2018) Cite this as: BMJ 2018;360:k311
- Richard Smith, chair and former The BMJ editor in chief (1991-2004)1
- 1icddr,b, Dhaka, Bangladesh
In 1999 TheBMJ called the private finance initiative (PFI) “perfidious financial idiocy,”1 and in 2017 the Office for Budget Responsibility described it as a “fiscal illusion.”2 Now a data driven report from the National Audit Office shows that PFIs have been more expensive than the use of public financing for the building of hospitals, schools, and other public buildings and has mostly not realised the benefits hoped for.3 Published in the same week as the collapse of Carillion, a large company fulfilling PFI contracts, the report has helped propel private financing and provision of public services high on the political agenda.
The difference between conventional public procurement of new buildings and PFIs lies in the financing. In both cases private contractors do the work, but with PFIs the money comes from the private sector. The public sector then pays back the private sector over some 25-30 years from when the building is delivered. The UK has over 700 PFI projects with a capital value of around £60bn (€68bn; $83bn). Annual charges were £10.3bn in 2016-17, and even without any new projects charges will continue into the 2040s and cost …