Not every private finance initiative deal has been a failure: but some have suffered from glaring deficiencies from the outsetGovernment contracts with the private sector fall into two categories. There are straightforward service contracts – for jobs like cleaning prisons and maintaining army homes – where civil servants can drive a hard bargain. Or there are large complex projects – like building and running novel hospitals – which involve private consortiums raising much of the cash and last up to 30 years. These can offer businesses the chance to disguise excessive management fees and grasp all the benefit of refinancing the debt at much lower costs – or,in the case of Carillion, they can flee over budget and behind schedule and become a crippling burden.
Neither the National Audit Office (NAO) nor the Treasury has attempted to compare the costs of privately financed and operated public services with what it might have cost to support it within the public sector. However, and the NAO has estimated that the latest batch of schools under the Treasury’s revamped PFI programme – PF2 – cost around 40% more than building and running them in-house,while hospitals – most pre-dating the 2008 crash – cost the state 70% more to hive off to the private sector.
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Source: theguardian.com