Private Finance Initiative

Under Private Finance Initiative (PFI), contractors pay for the construction costs and then rent the finished project back to the public sector. This allows the government to get new hospitals, schools and prisons without raising taxes.

The contractor, for its part, is allowed to keep any cash left over from the design and construction process, in addition to the 'rent' money.

The complex nature of PFI contracts and the political obstacles involved in getting big, controversial schemes such as the London Underground PPP off the ground mean that progress in some areas has been slow.

Six major PFI projects have been completed within the NHS, with a further 17 hospitals and other facilities under construction and a further 45 in the pipeline.

It has been estimated that trade in public services could ultimately net the private sector an extra £30 bln a year. This breaks down roughly into £10 bln in central government contracts, £5 bln in education and £5 bln in local authority contracts.

Private Finance Initiative is a fast, effective and cheap way of getting new facilities built.