The Financial Suite

Is PFI coming back to haunt the government?

While the Conservative government initially created the idea of the Private Finance Initiative (PFI) there is no doubt that this particular initiative flourished under the former Labour government. However, there are major concerns as the short-term cost savings from many PFI projects are turning into long-term liabilities for departments such as the NHS and Education.

A recent report suggested that PFI projects with regards to the NHS could cost upwards of £50 billion more than the initial cost of the project. This is around four or five times the initial cost of the projects and is simply a consequence of long-term contracts entered into to run these particular establishments. While there’s no doubt that PFI has allowed many projects to be brought forward by the UK government that may well have long-term consequences for funding in the future. As the future liabilities of departments such as the NHS and Education continue to rise, more and more funding set aside for future projects will be used to pay for historic projects.

Whether the UK government decides to defer any further PFI projects remains to be seen but the long-term consequences of these arrangements are only now beginning to come to light.

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Tags: Government