Private finance for the public good?

Still no sign of evidence based policy making

Early promotion of the British government's private finance initiative (PFI) suggested that everyone would benefit. The initiative is an extension of the government's contracting out policy. A hospital requiring new operating theatres or a scanner must seek competitive tenders from private sector companies both to build and to run these facilities. Under the initiative, an NHS trust does not purchase a scanner, it signs a contract to purchase, say, 1200 scans a year for 10 years. The NHS does not own the scanner so the cost of purchasing the equipment does not appear as a public expenditure. The result, so the enthusiasts predicted, would be that politicians could take credit for higher capital spending, doctors and patients could move from semiderelict buildings to modern facilities, and construction companies in the doldrums of a property recession would have extra work. The initiative would substitute private finance for public funds, and the NHS would have the use of more and newer hospitals, scanners, and incinerators.

But life is full of illusory free lunches. The initiative will not bring new money to the NHS. The services provided by privately financed capital …