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The Private Finance Initiative - Essay Example

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The Private Finance Initiative is a concept that involves private entities financing the construction and maintenance of major public utilities such as roads, schools and hospitals. The investment by the private entity is then recouped albeit with an interest from the government or local authority that authorised the project…
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The Private Finance Initiative
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The Private Finance Initiative

Download file to see previous pages... The basic premise behind the concept was to involve private players in service provision hence lessening the burden on the government. It was also meant to bring a touch of professionalism that is common in the private sector in provision of public services.
The entry of Britain in the European Union also played a significant role in the starting of this scheme. New EU laws put a cap on government expenditure resulting from both internal and external debt. These laws consequently put a major strain on government expenditure on public projects such as new schools, roads and hospitals. Technical experts therefore resulted to PFI in order to expedite the provision of essential public services.
In some circles the scheme was also known as the Private-Public partnership or simply the PPP. While the scheme was designed to ensure efficient provision of public services and reduce government borrowing from the public sector, it drew some criticism in some quarters. Some economic experts and political scientist pointed holes at the idea saying that it was a blatant display of government inefficiency. There was also fear that providers of these public services may be motivated by profits and end up providing mediocre services.
In public finance, the government provides public goods since unlike private players; it is not motivated by profits. ...
As noted earlier the Private Finance Initiative was the brainchild of the conservative government then led by John Major. It was billed as the most cost effective means of service provision to the public. As expected this attracted the wrath of the then opposition labour party who accused the government of engaging in unplanned privatisation of key government services. Courtesy of some wheel dealing and backroom consultations the labour party warmed up to the idea and consequently the Private Finance Initiative was implemented. In spite of its initial opposition to the idea, the labour went ahead to adopt PFI when it eventually swept to power under the stewardship of the youthful leader Tony Blair.

The chancellor Gordon Brown who was one of the most vocal opponents of the scheme beat a hasty turn around and became scheme's number one supporter. The chancellor praised the scheme pointing out that it was due to PFI that over 150 new schools were built, 40 new hospitals constructed and a dozen road and rail projects constructed within a very short span of time. Economists at the treasury also argued that it was due to PFI that the government had spent more on capital projects and there was less public borrowing by the state.

PFI was well manifested in London as it was responsible for the building of the ultramodern London Underground system. Mayor Ken Livingstone was forced to eat humble pie and support the project after its success. Akintole et al (2003) points out that Private Finance Initiative was one of the thorny issues in the labour government. There was the usual criticism that public assets were managed by private individuals in a questionable manner for a very long period of time.

It was also quietly pointed out that some highly important ...Download file to see next pagesRead More
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