Private Finance Initiative

Through the Private Finance Initiative (PFI), the private sector is able to bring in a wide range of managerial, commercial, and creative skills to the provision of public services, offering potentially huge benefits to the taxpayer . The primary focus of PFI activity to date has been on services sold to the public sector. In particular, projects where the public sector purchases services from the private sector which is responsible for the upfront investment in capital assets. The three main types of PFI transaction are:

• Services sold to the public sector, where the public sector pays only on the delivery of specified services to specified quality standards. Typically, the private sector, often acting in consortia, aims to reap synergies across design, build, finance and operation (DBFO).
• Financially free standing projects, where the private sector undertakes DBFO recovering costs entirely through direct charges on the private use of the asset (e.g. tolling) rather than from payments by the public sector. Public sector involvement is limited to enabling the project to go ahead through assistance with planning, licensing and other statutory procedures.
• Joint ventures, where the costs of the project are not met entirely through charges on the end users, but are subsidised from public funds. In many cases, the public sector subsidy secures wider social benefits.