Private finance initiative (PFI) / public-private partnership (PPP)

The private finance initiative (PFI) is a way of getting private sector involved in financing public sector projects like schools, hospitals and prisons. Firms take on the costs of building and running public services in return for a fixed fee from the Government, payable over a number of years.

Deals within the PFI are known as public-private partnerships, or PPPs. They range from the large (the London Underground PPP was worth £16bn in 2002) to much smaller projects (local government has adopted the financing method to pay for everything, from GP surgeries to street lighting schemes).

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