PFIs

PFIs, or Private Finance Initiatives, are a form of public–private partnership used to procure infrastructure and related services. In a typical PFI, a private sector consortium funds, designs, constructs, and sometimes operates a public asset. The government retains ownership of the asset and arranges for the private partner to supply services over a long contract, often 25 to 30 years. Payments to the private partner are made as unitary charges, usually covering ongoing maintenance and lifecycle costs, rather than a single upfront payment.

Risk transfer: construction, financing, and some operational risks are allocated to the private sector, while the public sector retains asset ownership and sets performance standards. At contract end, ownership and residual value may be transferred back to the public sector, or the arrangement may be renewed.

Common PFIs have funded hospitals, schools, roads, prisons, and other public infrastructure. They are used in the United Kingdom and in several other countries where PPP frameworks exist; a related approach is the broader PPP or P3 arrangement.

Advantages cited include faster delivery, access to private capital, and predictable lifecycle costs. Criticisms include higher long-term costs compared with public financing, complexity, lengthy contracts, and questions about value for money and transparency. Critics also point to lessons from the 1990s and 2000s about cost overruns and performance issues.

History: PFIs were introduced in the UK in the 1990s under the Conservative government and expanded under subsequent administrations. Over time, governments issued reforms and piloted revised approaches such as PF2 to address concerns about value for money and public accountability.