UK P3 projects crash and burn
Public sector bailouts only way forward.
LONDON, UK, April 18, 2009 — Somewhere in the bowels of the Treasury, a team of civil servants is giving one of Gordon Brown's most divisive policies a fundamental makeover. Without the existence of the newly created infrastructure finance unit, Manchester would have to do without a £635m waste disposal unit and the M25 would remain heavily congested. The Manchester scheme and the widening of the M25 motorway are private finance initiatives with a big problem: there is no private finance.
So last month the Treasury was forced to establish a unit whose remit replaces the "private" in PFI with "public". For long-standing critics of PFI, this bailout of £13bn worth of projects is the nadir of Brown's grand plan to protect the taxpayer from financial risk. Instead, taxpayers' money is being used by the government to subsidize the operation of many of the UK's largest PFI schemes.
"The financial crisis has highlighted a basic truth - that private finance is only a way to borrow money that will have to be repaid by the taxpayer sooner or later," says Stephen Glaister, professor of transport and infrastructure at Imperial College London. "Risk transfer has proved difficult or impossible, so the taxpayer has ended up bailing out the commercial failures of the PFI companies."
Tony Travers, director of the Greater London group at the London School of Economics, says: "The market for the private finance part of PFI has dried up. Therefore, the only way to get these projects to go ahead is for the public sector to bail them out."...
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A bridge too far for PFI schemes, by Dan Milmo, Phillip Inman and Aziz Durrani, The Guardian, April 18 2009
Posted: April 23, 2009
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