The high level conclusions emerging from this analysis - several of them being tentative and awaiting further evidence as the PFI project pipeline delivers more practical experience - are:
• One way or another, many more PFI schemes are likely to be on balance sheet going forward. This therefore highlights the question of what the real benefits of PFI have been given that any supposed benefits from gaming public expenditure controls will disappear.
• PFI has made a difference to the implementation of large asset-intensive projects, and the role of private finance within PFI has been a big part of that difference.
• In particular, senior debt has exerted beneficial discipline at the front end of projects (though has disappointed in the part it has played when projects get into trouble further down the line); and equity has delivered integration benefits as well as providing an incentive for sustained good performance during the operational phase of projects. Equity has also cushioned the public sector from a significant part of the pain in the very few cases where projects have defaulted.
• PFI has also had a wider beneficial effect on big ticket public procurement, particularly in the areas of risk analysis and allocation.
• In principle some (but not all) benefits of private finance could be brought about by reforms to project control disciplines and through other non-PFI contractual mechanisms. While it is too early to reach firm conclusions on the new initiatives now in play, it is not easy to see how they could ever fully match the disciplines fl owing from externally provided finance.
There are ways of improving PFI, some of which will become easier to develop now that accounting classification is becoming a non-issue. In particular, there are ways of reducing the costs of externally provided senior debt though these will need to be carefully calibrated so as not to weaken its disciplinary influence.