1. On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury) and the Infrastructure and Projects Authority (IPA) on the Private Finance Initiative (PFI) and Private Finance 2 (PF2).1
2. The government has been using the Private Finance Initiative (PFI) and its successor PF2 for over 25 years to build public infrastructure assets (particularly schools, hospitals and roads) and deliver services to the public. In PFI deals the public sector enters into a contract with a private company specifically created to deliver the asset. The private company raises finance from equity investors and borrowing. Once the asset is constructed and available for use, the taxpayer makes annual payments to the private company over the length of the contract, typically 25 to 30 years. These annual payments cover capital and interest repayments, shareholder dividends, asset maintenance, and in some cases other services like cleaning.
3. There are currently over 700 PFI and PF2 contracts in operation, representing around £60 billion of assets. Public bodies paid £10.3 billion to private companies under these contracts in 2016 - 17.2 Even if the government does not enter into any new PFI-type deals it will pay private companies a further £199 billion between April 2017 until the 2040s for existing deals, in addition to some £110 billion already paid.3 We examined the PFI model in 2011 as part of our inquiry into "Lessons from PFI and other projects". We concluded that taxpayers could get a much better deal from PFI deals, which looked better value for the private sector than for the taxpayer, and that in the prevailing public expenditure climate there were legitimate concerns being expressed about the continuing financial cost of PFI for public organisations such as NHS Trusts.4
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1 Report by the Comptroller and Auditor General, PFI and PF2, Session 2017-19, HC 718, 18 January 2018
3 C&AG's Report, para 2.4; NAO briefing, The choice of finance for capital investment, March 2015, para 2.9
4 Committee of Public Accounts, Lessons from PFI and other projects, 44th Report of Session 2010-12, HC 1201, 1 September 2011