KC
If you want to build hospitals or schools etc, you have to get the money from somewhere.
PFI became popular all over the world because it was quick and convenient and despite what you think, not all that expensive.
Basically there is no typical PFI deal but usually a local authority declares that it needs say a hospital and if approved will design its own specification to cover the size/shape of the building, the equipment it requires such as X ray equipment and beds as well as a car park.
Then it goes out to tender and secures the best price.
The next stage is how to raise the finance.
Back in the "old days", it would take an average of nearly 6 years to build a hospital, mainly because the government had to release the cash on a drip feed basis. With a PFI loan, the average time went down to 2.5 years because the cash was guaranteed.
PFI was basically a consortium of Banks / Construction companies and Facility Management organisations who would agree to raise the money. They would then build and equip the hospital and also maintain it for the period of the loan which typically was 30 years.
This form of funding was initially very popular and was used by Nulab because Gordon Brown liked the fact that the building appeared on the National asset register but the loan did not appear and was effectively hidden. George Osborne has always been anti PFI.
To be fair, back in the early 2000's, Brown commissioned an independent audit of the effectiveness of PFI by the National Audit Office and they recommended it's continued use.
The main criticism of PFI is that we borrow money from the private sector and our children have to repay the debt. The counter argument has always been that the children and grandchildren will be the main users, so it is fair for them to contribute.
In essence PFI does make sense but where it fell down was that the government over did it a bit and went on a PFI spending spree between 2000 - 2008. They presumed that they could borrow large amounts of money and as time progressed, the value of the debt would reduce in real terms as inflation would nibble away at it. Most of us bought our houses on that premise and the government did the same.
In reality there as been no inflation, so the debt remains high in real terms and also most of the hospitals were not built with enough beds (blame the NHS for that) and not enough car parking spaces (blame the LA for that), so top up loans were required and it on this sort of thing where the consortiums make their money. However this was all agreed in advance at the inception of the contract.
Every contract has a termination clause where the NHS can buy itself out of the contract but it is complex and costly, so most PFIs will run their natural course.
What would solve the problem would be a long spell of inflation where the value of the debt would reduce in real terms.
Therefore, and this is just my personal opinion, PFI will remain out of favour for a while but will regain favour when the economy takes off along with inflation.
To sum up, any key board warrior can criticise PFI but despite the cost, it is responsible for the building of dozens of hospitals which without it, would not be there.
Regards
Mick