Explainer: What are private finance initiatives (PFIs)?

While they may look like any other hospital, school or police station, many public-sector buildings across the country are in fact owned and run by private companies.

Wednesday, 16th October 2019, 2:51 pm
Updated Wednesday, 16th October 2019, 3:51 pm
The Lost Billions: JPIMedia's investigation into PFI schemes

A private finance initiative (PFI) works in a similar way to a phone contract – authorities get their hands on shiny new buildings upfront and will usually get to own them outright at the end of their contracts.

The deals often last for 25 or 30 years, with payments also covering services such as cleaning and maintenance.

PFI began under John Major’s Conservatives in the early 1990s but proliferated during the New Labour years and continued under the Tories.

The model was abolished last year but about 700 active schemes remain – including ten in Sussex.

When contracts were signed, the cost of annual bills was often linked to the now-discredited Retail Price Index measure of inflation, meaning many annual payments have been rising steeply while public-sector budgets were being squeezed.

An investigation by JPIMedia has found taxpayers are shelling out billions of pounds more than planned for schools, hospitals and other infrastructure projects under the controversial deals.

Rocketing inflation and extra costs are set to add at least £4billion to the overall price tag of the schemes, according to figures obtained from hundreds of public bodies.