In proponents of PFI argue that it allows the

In 1997, the New Labour government introduced two pieces of
legislation: the National Health Service (Private Finance) Act 1997 and the
Local Government Act 1997, which enabled local authorities and other public
organisations to introduce the private sector as a partner, rather than as a
contractor, in the process of delivering public services. Public Finance
Initiatives (PFI) gave local authorities access to new sources of capital
investment and management skills for new and improved facilities and created
new opportunities for the private sector to combine construction, facilities
management, maintenance and operating skills (Ball, 2011). Under the
conservatives, PFI’s often maintained a clear division between public
organisations and private companies. Private companies planned, designed and
constructed buildings or roads and then sold them to public-sector
organisations that provided the relevant service. Under New Labour, PPPs
(Public Private Partnerships) became a means of encouraging public and private
organisations to form deeper partnerships that involve collaboration at all
stages of a joint venture; the private sector brought its management and
expertise as well as finance (Eaton, 2008). The term PPP describes any private
sector involvement in public services including the transfer of council homes
to housing associations using private loans, and contracting out services like
waste collection or hospital cleaning to private companies (Henderson, 1999).
During New Labour’s first term in office, over 150 PPP contracts were signed,
covering 4 prisons, 5 hospitals and 520 schools, with a total value of over £12
million. The attraction of PPP’s for the government is that it avoids making
expensive one-off payments to build large-scale projects that involve unpopular
tax rises, and since the risks of PPP projects are technically transferred to
the private company, in the government’s accounts it does not show up as
increased public borrowing (Carroll, 2000). However, critics claim that as with
any form of hire purchase, paying for a product over a long period of time is
more expensive than buying it with cash up front (Gunnigan, 2007). They point
out that governments can borrow cash at a cheaper rate than the private sector
(Middleton, 2000). There was is also a question mark over how much risk is
genuinely transferred to the private sector given the government’s record of
bailing out private companies managing troubled public services (McDonough,
1999). Unison (2001) argued that PFI schemes lacked accountability, cost
councils too much money and that they should only be used as a last resort for
capital projects. Many others see PFI/PPP as indicative of the close
relationship the government has with big businesses, with the large
multinational businesses often emerging as the key beneficiaries of PFI schemes
(Keating, 2000). On the other hand, proponents of PFI argue that it allows the
public sector to avoid significant capital expenditure and also enables them to
tap into private sector management expertise (Collin, 2001). It allows local
authorities to focus on strategic priorities and leave operational management
to the private sector. The government would also argue that PFI’s allows them
to plan and budget more effectively as long term contracts pass significant
ongoing maintenance costs to the private sector.