For what is essentially a dry accounting and procurement issue, discussions around the private finance initiative (PFI) have long inspired a surprisingly fierce, almost religious fervour. Supporters and critics alike are passionate in defence of their own revealed truth about the controversial method of financing and procuring public projects.

However, since 2018, this is a debate that, in England at least, has been largely silent, given the nay-sayers effectively won the argument. The Treasury cancelled the successor scheme to PFI, with then chancellor Philip Hammond declaring PF2 “inflexible and overly complex”

But, with the Treasury understood to be looking again at how it can bring in private finance to help fund its social and economic infrastructure plans, it is now an argument that looks ready to fire up all over again. Given this, it seems sensible to ask whether returning to this form of project delivery, used on over 700 UK projects to date, would be a good idea.

PFI differs from traditional public sector build projects because it sees the public sector engage a private consortium to finance, design, build, operate and maintain a public asset over a 25-year period – with the private sector’s costs paid back through an annual “unitary charge” once the scheme is completed.

While PFI allows schemes to go ahead, the cost of private companies borrowing the money to invest in projects is higher than the cost of borrowing from the public balance sheet. But despite this, the National Audit Office in 2011  and the Public Accounts Committee  again in 2018 found that, over a quarter of a decade on from the inception of the model, the Treasury had made no full value for money assessment of the use of PFI compared to traditional forms of procurement.

Fortunately, Building is on hand to summarise the arguments. As Rachel Reeves weighs up the pros and cons of a new limited version of privately financing infrastructure ahead of the launch of the 10 year infrastructure strategy in June, here is our cost-benefit analysis of the track record.

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