The Private Finance Initiative

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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.


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. ...
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