Report

PFI: Getting the bill on the fiscal credit card

Think tank: National Institute of Economic and Social Research (NIESR)

Author(s): Max Mosley

January 22, 2025

This report from UK think tank the National Institute of Economic and Social Research Private Finance explores the use and impact of PFI.

Initiative (PFI) continues to have a legacy in the public sector, with repayment costs being 3.3 times larger on average than the value of the infrastructure they built.

The report explores the use and impact of PFI, finding that £13.5 billion is spent by local authorities every two-to-five years on PFI repayments. Between 2018 and 2023, £4.2 billion (31 per cent) of all PFI spending by local authorities was on interest rates alone. 845 schools were also built and/or are maintained by a PFI contract, covering nearly half a million pupils). This new analysis finds that PFI schools are financially worse off than non-PFI schools, after controlling for key characteristics. While many consider the PFI experiment to be a failure, the current government may look to reintroduce a new version to finance its ‘decade of national renewal’, given the updated spending rules still do not leave sufficient headroom to finance all this expansion through conventional fiscal policy. However, to do so it will need to learn from the lessons of the past, which will remain challenging given the lack of institutional knowledge over the use and impact of PFI.