Increased private participation in infrastructure provision and management began in the United Kingdom in the 1980s. The momentum from this decade continued into the following one when in 1992 the national government began the Private Finance Initiative (PFI). Her Majesty's (HM) Treasury issued and has administered the policy since its inception. To some, the terms PFI and PPP are synonymous. PFI, however, is a specific U.K. policy to increase private participation in infrastructure financing and provision, which obviously generated various PFI programs in the United Kingdom. Total PFI activity to date approaches £60 billion. The first three highway PPPs were concession arrangements-Queen Elizabeth II Bridge, Second Severn Crossing, and M6 Toll-with real tolls used to secure the private financing. Beginning in 1996, new PPP contracts eliminated real tolls and made road use free at the point of use to drivers. Consequently, PPP contractors have secured financing for capital costs while the government has paid PPP contractor service charges from budgetary funds.
Original drivers of the PFI policy include the following:
♦ An infrastructure deficit, created by years of underinvestment, which exceeded available public sector funding
♦ Dissatisfaction with the results of conventional construction contracts (cost overruns, schedule slippage, high asset life-cycle costs)
♦ Desire to transfer more of the risk to the private sector
♦ Desire to get better value for public sector expenditures
Unlike Portugal and Spain, the United Kingdom is not part of the Eurozone, so it is not bound to meet EU convergence criteria. Thus, the pressure to move liabilities off the public sector balance sheet is a less urgent issue.