Economics of PFI in the NHS

EDITOR—In his editorial Smith rehearsed all the old arguments about the private finance initiative (PFI) in the NHS.1 As he says, these criticisms are becoming familiar but this does not mean that they are correct.

I accept that the private sector cannot borrow as cheaply as the public sector. However, deals under the private finance initiative achieve greater value for money because their increased operational savings more than outweigh the additional costs of borrowing. When measured over the lifetime of the contract, every major scheme to …