Q&A: Private Finance Initiatives explained

What is a PFI?

Private Finance Initiatives were introduced in the UK in 1992 as a way to build roads, schools, hospitals and other public buildings and infrastructure.

How do they work?

Private contractors pay for the construction then rent back the finished project to the Government. Critics liken the scheme to privatisation and claim PFIs cost more in the long run than using taxpayers’ money.

What are their drawbacks?

Jacky Davis, author of NHS SOS and a consultant radiologist, has described PFIs as a “disaster” for the health service, saying in November that £60bn had been spent on £11bn-worth of hospitals.

In 2012, the Government blamed expensive PFI deals signed under Labour for causing severe financial problems at 10 hospital trusts. Three PFI schools in Essex, Brighton and Northern Ireland were forced to close in 2011 just a few years after they were built, leaving taxpayers to pay their £70m cost over decades. The Commons Public Accounts Committee concluded in 2011 that revenue was being lost because investors in PFI schemes were using off-shore tax schemes.