Abstract
This article outlines and critiques the main fiscal and economic rationales for the Private Finance Initiative – by far the dominant form of public‐private partnership in the United Kingdom (UK) – and examines the impact of the policy on the long term financial viability of the National Health Service. It shows that the interest rate on private finance contains a significant element of ‘excess return’ to investors, and there is no evidence that this ‘excess cost’ to the public sector is offset by greater efficiency through the contracting process. It concludes that the private financing of public capital investment is highly problematic – and can have a serious impact on the finances and capacity of public authorities.
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