CHAPTER 1: INTRODUCTION |
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
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.