Vital public services including schools and hospitals “face serious disruptions” as Private Finance Initiative ends
19 March 2021
Since the 1990s successive governments have used the Private Finance Initiative (PFI) to build and run more than 700 public infrastructure assets including roads, schools and hospitals. These contracts between the private sector and public bodies are now coming to an end. In its report published today the Public Accounts Committee warns that government’s lack of preparation for this massive transfer of public assets, combined with insufficient data and skills, could lead to the contracts ending in disruption to vital public services, and added costs.
- Read the report summary
- Read the conclusions and recommendations
- Read the full report: Managing the expiry of PFI contracts [PDF 288 KB]
- Public Accounts Committee
Typically, PFI contracts last 25-30 years. Around 700 such contracts exist, representing public infrastructure assets worth around £60 billion and future costs of around £170 billion. The earliest contracts have expired and some 200 will expire in the next 10 years, accelerating from 2025 onwards.
By minimising expenditure on maintenance in the final years of the contract, PFI investors can pay out higher dividends and walk away with limited threat of recourse. The Infrastructure Projects Authority (IPA) is aware of ‘difficult’ investors who are not sharing important information that authorities need to successfully manage the expiry process. It plans to engage with investors but has not yet set out what this will entail, or how this will help authorities when disputes arise.
The high concentration of PFI ownership among private investors allows the private sector to take a portfolio approach to managing the expiry process, which risks putting the public sector at a disadvantage. A lack of contractual tools to hold non-cooperative investors to account further disadvantages authorities in securing value for money from the expiry process.
Any mismanagement of the expiry process could result in large sums of taxpayer’s money being wasted. A lack of attention from the public authorities running these contracts could also leave the public sector footing large bills for rectification work which the PFI company has already been paid to do. The Committee says “What is certain is that action needs to be taken now to avoid this becoming a huge payday for consultants.”
Meg Hillier MP, Chair of the Public Accounts Committee said:
"We are about to see a wave of PFI contracts come to an end. These require careful and advance challenge to ensure that the asset is handed to its public sector owner in good order. These include schools and hospitals.
The taxpayer could end up with a huge bill if PFI companies are not challenged and held to account.
These PFI contracts cover £60 billion of public infrastructure assets, carrying £170 billion of associated costs. Crunch time is approaching and taxpayers need to be alert to the risk. Public bodies and the Treasury need to be on top of this issue now."