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.
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).
The supposed advantage to the Government is that PFI transfers some of the risk of major capital projects to the private sector while spreading out the cost. For the companies, the margins are often bigger than their commercial projects and deals can be refinanced at a lower rate once the (risky) building stage is complete.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Stop inheritance tax perk on pensions, says IFS
The government could raise billions of pounds in revenue by closing inheritance tax loopholes, such as on pensions and AIM shares. Is your pension at risk?
By Ruth Emery Published
-
Revealed: Best buy-to-let property hotspots in the UK
Looking for the best buy-to-let property locations in the UK? We reveal the top 10 postcodes with the strongest rental returns
By Oojal Dhanjal Published