The Private Finance Initiative specifies a method by which the United Kingdom government provides financial support for "public private partnerships" known as Public-Private Partnerships (PPPs) between the public and private sectors.

These projects aim to deliver all kinds of works for the public sector, together with the provision of associated operational services. In return, the private sector receives payment, linked to its performance in meeting agreed standards of provision.

PFI is used in central and local government. In the case of projects procured by local government authorities, the capital element of the funding enabling the local authority to pay the private sector for these projects is given by central government in the form of what are known as PFI "credits". PFI is basically just a different way of purchasing. The local authority does the buying, just as it does at present.

Each PFI project is different depending on local circumstances. However there are some common threads that run through all projects. The public sector authority signs a contract with a private sector "Operator". During the period of the contract the Operator will provide certain services, which are currently provided by the local authority. The Operator is paid for the work over the course of the contract and on a "no service no fee" performance basis. The authority will design an "output specification" which is a document setting out what the Operator is expected to achieve. If the Operator fails to meet any of the agreed standards it will lose an element of its payment until standards improve. If standards do not improve after an agreed period, the public sector authority is entitled to terminate the contract.

It is also a very controversial program, with many trade unions across Britain launching campaigns against it. PFI has also been a centre of the Old Labour resistance to New Labour. Many see PFI as 'creeping privatisation' claiming that the plan is privatisation in all but name. There have been many problems with PFI, many of which have been monitored by the Private Eye magazine, a British satirical magazine.

The National Audit Office scrutinises public spending on behalf of Parliament and is independent of Government. It provides review reports on the value for money of many PFI transactions and makes recommendations pointing out how public sector authorities can improve their practices so that these transactions can be made even better value for money in the future

See also

• UK topics

External links

Websites

• HM Treasury's PFI home page [1]
• UK National Audit Office review reports of individual PFI projects [2]
• UNISON PFI Research and Campaign [3]

Reports

• UK Parliament research paper on PFI (2001) [4]
• PricewaterhouseCoopers (2001), "PPPs - A Clearer View" [5]
• Institute of Public Policy Research paper: "Building Better Partnerships - Commission on Public Private Partnerships" (June 2001) [6]
• 2004 Report on PFI by BBC Radio 4's File on four (full transcript - PDF format).
• Northern Ireland Audit Office report (2004) into PFI in the health sector [7].