Magazine article Public Finance

Letters

Magazine article Public Finance

Letters

Article excerpt

Outrageous fortunes of PFI

There's something rotten in the state of (PFI funding in) Great Britain. In paraphrasing Hamlet, I am of course referring to the Private Finance Initiative and to your cover feature: 'Is PFI on the critical list?' (August 29-September 4).

My somewhat prejudiced answer to the guestion the feature posed is: I hope so.

I did write to Public Finance some 13 years ago setting out my concerns about the PFI, and these have not been allayed but rather increased by the passage of time. I suspect that, over their lifetimes, PFI projects will be seen to have been a very expensive option compared with the results of the initial project appraisals.

When assessing a PFI project against real comparators, you need to know three fundamental pieces of data: the true costs of funds over the whole life of the project; which parties the (many) risks lie with; and what sensitivities there are around these first two pieces of data. Once you have this information, and provided the sensitivities are not too large, you can then make a reasonable decision.

The problem with the PFI, of course, is that there is not a level playing field, especially in relation to the on/off balance sheet argument, which at last seems about to be resolved. …

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