Magazine article Public Finance


Magazine article Public Finance


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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