Private Finance Projects and off-balance sheet debt - Economic Affairs Committee Contents


1.  We decided in June 2009 to conduct an inquiry into Private Finance Projects and off-balance sheet debt and appointed as Specialist Adviser Professor Paul Grout of the University of Bristol. We issued a public Call for Evidence in July 2009 and heard oral evidence from October 2009 until January 2010.

2.  Private Finance Projects (PFPs) are contractual arrangements between the public and private sectors which use private finance to realise public programmes. The term is used in this Report to cover all forms of public-private partnerships (PPPs), focussing mainly on the Private Finance Initiative (PFI), a widely-used model of PFP.

3.  The PFI model has two main features: use of private, mainly debt finance; and the bundling of construction, maintenance and sometimes other services into long-term "whole life" contracts under which private sector contractors are responsible for the construction and functioning of public buildings over many years, in return for annual payments by public authorities.

4.  In recent years PFPs have become well-established. There are now about 800 in being in the United Kingdom, with a capital value of about £64 billion. There has been rapid growth in these projects and they affect most of us as users of public services and taxpayers. Their significance, together with the impact of the recent banking crisis upon the availability of private sector finance, the economic recession and the prospective squeeze on public expenditure, all make this a good time to assess two decades of evolution and implementation of PFPs and, in particular, their future prospects. There has been no Parliamentary inquiry into the broad topic of PFPs since 2000.

5.  PFPs enjoy a generally good reputation for delivering projects on time and within budget. But they remain controversial. There have been some high profile failures. Critics say they are too costly and inflexible. Questions have been raised about their treatment in the national accounts.

6.  In this report we take a broad view of the effectiveness and value for money of PFPs so far, recognising that a final verdict will be possible only when most of them have run their course over the coming decades. We make a number of recommendations as to their future.

7.  We are grateful to all our witnesses for their written and oral evidence to our inquiry, and especially to the National Audit Office for their thorough and helpful contribution.

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