Editing Private finance initiative (section)

=== Implementation ===
In education, the first PFI school opened in 2000.<ref name=kpmg>[[KPMG LLP]], ''Investment in school buildings and PFI - do they play a role in educational outcomes?'', 2008 version</ref>{{rp|1}} In 2005/2006 the Labour Government introduced [[Building Schools for the Future]], a scheme introduced for improving the infrastructure of Britain's schools. Of the £2.2 billion funding that the Labour government committed to BSF, £1.2 billion (55.5%) was to be covered by PFI credits.<ref name=num10-ukgov>{{Cite web|url=http://www.number10.gov.uk/output/Page5801.asp|archiveurl=https://web.archive.org/web/20070812122307/http://www.number10.gov.uk/output/Page5801.asp|url-status=dead|title=Building Schools for the Future - Government factsheet|archivedate=12 August 2007}}</ref> Some local authorities were persuaded to accept [[Academy (English school)|Academies]] in order to secure BSF funding in their area.<ref>{{cite web|url=http://www.antiacademies.org.uk/Home/opposing-the-academies-bill/protestonjuly19th|title=Opposing the Academies Bill|publisher=Anti-Academies Campaign|access-date=9 July 2010|archive-url=https://web.archive.org/web/20100711100152/http://www.antiacademies.org.uk/Home/opposing-the-academies-bill/protestonjuly19th|archive-date=11 July 2010|url-status=dead}}</ref>

In 2003 the Labour Government used [[public-private partnership]] (PPP) schemes for the privatisation of [[London Underground]]'s infrastructure and rolling stock. The two private companies created under the PPP, [[Metronet (British infrastructure company)|Metronet]] and [[Tube Lines]] were later taken into public ownership.<ref>{{Citation| last = Wright| first = Robert| title = Tube Lines shareholders are bought out by TfL| newspaper = The Financial Times| date = 8 May 2010| url = http://www.ft.com/cms/s/0/97bb4c24-5a38-11df-acdc-00144feab49a.html| access-date = 14 July 2010| archive-url = https://web.archive.org/web/20100526175610/http://www.ft.com/cms/s/0/97bb4c24-5a38-11df-acdc-00144feab49a.html| archive-date = 26 May 2010| url-status = dead}}</ref>

By October 2007 the total capital value of PFI contracts signed throughout the UK was £68bn,<ref name="prsp"/> committing the British taxpayer to future spending of £215bn<ref name="prsp">{{Citation | last=Timmins | first=Nicholas | title=Projects Seek Partners | newspaper=Financial Times | date=24 February 2009 | url=http://www.ft.com}}</ref> over the life of the contracts. The [[2008 financial crisis]] presented PFI with difficulties because many sources of private capital had dried up. Nevertheless, PFI remained the UK government's preferred method for public sector procurement under Labour. In January 2009 the Labour [[Secretary of State for Health]], [[Alan Johnson]], reaffirmed this commitment with regard to the health sector, stating that "PFIs have always been the NHS’s 'plan A' for building new hospitals … There was never a 'plan B'".<ref name="rotp">
{{cite web  | last = Omonira-Oyekanmi  | first = Rebecca  | title = Root of the Problem  | work = PPP Bulletin  | url=http://www.pppbulletin.com/features/view/791  | access-date = 2009-02-04 }}</ref> However, because of banks' unwillingness to lend money for PFI projects, the UK government now had to fund the so-called 'private' finance initiative itself. In March 2009 it was announced that the Treasury would lend £2bn of public money to private firms building schools and other projects under PFI.<ref name="gtpu">{{cite news | title =Government to 'prop up' PFI deals  | work =BBC | url=http://news.bbc.co.uk/1/hi/uk_politics/7920522.stm | access-date =2009-03-03 | date=2009-03-03}}</ref> Labour's [[Chief Secretary to the Treasury]], [[Yvette Cooper]], claimed the loans should ensure that projects worth £13bn – including waste treatment projects, environmental schemes and schools – would not be delayed or cancelled. She also promised that the loans would be temporary and would be repaid at a commercial rate. But, at the time, [[Vince Cable]] of the [[Liberal Democrats (UK)|Liberal Democrats]], subsequently [[Secretary of State for Business]] in the [[Coalition Government 2010–2015|coalition]], argued in favour of traditional public financing structures instead of propping up PFI with public money:

{{blockquote|The whole thing has become terribly opaque and dishonest and it's a way of hiding obligations. PFI has now largely broken down and we are in the ludicrous situation where the government is having to provide the funds for the private finance initiative.<ref name="gtpu"/>}}

In opposition at the time, even the [[Conservative Party (UK)|Conservative Party]] considered that, with the taxpayer now funding it directly, PFI had become "ridiculous". [[Philip Hammond]], subsequently [[Secretary of State for Transport]] in the coalition, said:

{{blockquote|If you take the private finance out of PFI, you haven’t got much left . . . if you transfer the financial risk back to the public sector, then that has to be reflected in the structure of the contracts. The public sector cannot simply step in and lend the money to itself, taking more risk so that the PFI structure can be maintained while leaving the private sector with the high returns these projects can bring. That seems to us fairly ridiculous.<ref name="prsp"/>}}

In an interview in November 2009, Conservative [[George Osborne]], subsequently [[Chancellor of the Exchequer]] in the coalition, sought to distance his party from the excesses of PFI by blaming Labour for its misuse.<ref>{{cite news
  | last = Petry
  | first = Andrew
  | title = PFIs: the good and the bad - but still on the table
  | newspaper = The Guardian
  | url=http://www.guardianpublic.co.uk/pfis-future-new-government-investment
  | access-date = 11 June 2010 }}</ref> At the time, Osborne proposed a modified PFI which would preserve the arrangement of private sector investment for public infrastructure projects in return for part-privatisation, but would ensure proper risk transfer to the private sector along with transparent accounting:
[[File:George Osborne 0437.jpg|thumb|upright|right|George Osborne]]
{{blockquote|The government's use of PFI has become totally discredited, so we need new ways to leverage private-sector investment . . . Labour's PFI model is flawed and must be replaced. We need a new system that doesn't pretend that risks have been transferred to the private sector when they can't be, and that genuinely transfers risks when they can be . . . On PFI, we are drawing up alternative models that are more transparent and better value for taxpayers. The first step is transparent accounting, to remove the perverse incentives that result in PFI simply being used to keep liabilities off the balance sheet. The government has been using the same approach as the banks did, with disastrous consequences. We need a more honest and flexible approach to building the hospitals and schools the country needs. For projects such as major transport infrastructure we are developing alternative models that shift risk on to the private sector. The current system – heads the contractor wins, tails the taxpayer loses – will end.<ref>{{Cite news
  | last = Hutton
  | first = Will
  | title = The Great Debate: Will Hutton vs. George Osborne
  | newspaper = The Observer
  | location = London
  | date = 15 November 2009
  | url = https://www.theguardian.com/politics/2009/nov/15/will-hutton-george-osborne-debate
  | access-date = <!-----10 March 2010----->}}</ref>}}

Despite being so critical of PFI while in opposition and promising reform, once in power George Osborne progressed 61 PFI schemes worth a total of £6.9bn in his first year as Chancellor.<ref name="Sparrow 2011">{{Cite news
  | last = Sparrow
  | first = Andrew
  | title = George Osborne backs 61 PFI projects despite earlier doubts over costing
  | newspaper = The Guardian
  | location = London
  | date = 18 April 2011
  | url = https://www.theguardian.com/politics/2011/apr/18/george-osborne-backs-pfi-projects
}}</ref> According to Mark Hellowell from the [[University of Edinburgh]]:

{{blockquote|The truth is the [[Coalition Government 2010–2015|coalition government]] have made a decision that they want to expand PFI at a time when the value for money credentials of the system have never been weaker. The government is very concerned to keep the headline rates of deficit and debt down, so it's looking to use an increasingly expensive form of borrowing through an intermediary knowing the investment costs won't immediately show up on their budgets.<ref name="Sparrow 2011"/>}}

The high cost of PFI deals is a major issue, with advocates for renegotiating PFI deals in the face of reduced public sector budgets,<ref name="Triggle 2010"/> or even for refusing to pay PFI charges on the grounds that they are a form of [[odious debt]].<ref>{{Citation
  | last = Monbiot
  | first = George
  | title = The bill for PFI contracts is an outrage. Let us refuse to pay this odious debt
  | newspaper = The Guardian
  | location = London
  | date = 22 November 2010
  | url = https://www.theguardian.com/commentisfree/2010/nov/22/pfi-private-finance-refuse-debt
  }}</ref> Critics such as Peter Dixon argue that PFI is fundamentally the wrong model for infrastructure investment, saying that public sector funding is the way forward.<ref name="PFI is a liability">{{Cite news
  | last = Dixon
  | first = Peter
  | title = We can't fool ourselves – PFI is a liability
  | newspaper = The Guardian
  | location = London
  | date = 13 November 2009
  | url = https://www.theguardian.com/commentisfree/2009/nov/13/pfi-hospitals
  | access-date = <!-----10 March 2010----->}}</ref>

In November 2010 the UK government released spending figures showing that the current total payment obligation for PFI contracts in the UK was £267 billion.<ref name="Datablog 2010">{{Citation
  | title = The Datablog Guide to PFI
  | newspaper = The Guardian
  | location = London
  | date = 19 November 2010
  | url = https://www.theguardian.com/politics/datablog/2010/nov/19/pfi-public-finance
  | first=Lisa
  | last=Evans
}}</ref> Research has also shown that in 2009 the Treasury failed to negotiate decent PFI deals with publicly owned banks, resulting in £1bn of unnecessary costs. This failure is particularly grave given the coalition's own admission in their national infrastructure plan that a 1% reduction in the cost of capital for infrastructure investment could save the taxpayer £5bn a year.<ref name="Treanor 2010"/>

The [[Department for Environment, Food and Rural Affairs]] (DEFRA) withdrew funding support from seven waste management PFI projects as a result of the [[2010 Spending Review]], directing the cuts to those projects where least progress had been made with contract procurement and obtaining [[Planning permission in the United Kingdom|planning permission]].<ref>Mann, N., [https://www.letsrecycle.com/news/defra-reveals-rationale-for-waste-pfi-funding-cuts/ Defra reveals rationale for waste PFI funding cuts], ''letsrecycle.com'', published 6 December 2010, accessed 20 January 2024</ref>

In February 2011 the Treasury announced a project to examine the £835m [[Queen's Hospital]] PFI deal. Once savings and efficiencies are identified, the hope - as yet unproven - is that the PFI consortium can be persuaded to modify its contract. The same process could potentially be applied across a range of PFI projects.<ref name="Timmins 2011">{{Citation
  | last = Timmins
  | first = Nicholas
  | title = Treasury struggles to win PFI rebates
  | newspaper = Financial Times
  | location = London
  | date = 16 February 2011
  | url = http://www.ft.com/cms/s/0/7e77b642-39be-11e0-8dba-00144feabdc0.html#axzz1KKQB4z7D
}}</ref>