The Economist Sep 30th 2017 by The Economist

Author:The Economist
Language: eng
Format: mobi, epub
Tags: The Economist, Tin tức
Publisher: The Economist
Published: 2017-09-28T20:47:47.177000+00:00

* * *

This article was downloaded by calibre from https://www.economist.com/news/britain/21729766-whipping-conference-delegates-app-insurgent-outriders-are-increasingly/print

| Section menu | Main menu |

| Tiếp | Section menu | Main menu | Trước |

* * *

Going public

PFI’s pros and cons are more nuanced than Labour thinks

The shadow chancellor breaks from a previous generation of Labour wonkery

Sep 30th 2017

THE financing of public infrastructure is hardly a topic to set pulses racing. So it is a measure of the unpopularity of the private-finance initiative that a Brighton conference hall erupted when John McDonnell, the shadow chancellor, promised there would be no new PFI deals under a Labour government and that he would bring existing ones “back in-house”. Horror stories about rip-offs under PFI contracts—including one in which a school had to pay £487 ($650) for a lock—go some way to explaining their bad reputation. That the beneficiaries of this largesse are companies making, in the words of Mr McDonnell, “huge profits”, explains the rest.

The shadow chancellor’s statement marks a break with a previous generation of Labour wonkery. Although PFI was introduced by the Conservatives in 1992, it blossomed under the subsequent Labour government. Centre-left technocrats believed that bringing in private investors to design, build, finance and operate schools, hospitals and the like, with the state promising to lease the asset for decades, would have two main advantages. First, by giving contractors an incentive to consider maintenance, and by increasing private-sector involvement in management, it would make construction cheaper and of higher quality. Second, by keeping infrastructure investment off the public balance-sheet, it helped Gordon Brown, the chancellor from 1997 to 2007, to meet his rule that public debt should not exceed 40% of national income.

Countries around the world have copied the approach. But its use in Britain declined significantly after the financial crisis of 2008 (see chart). Public debt rose, investor enthusiasm declined and accounting rules were tightened to bring more of the debt onto the public balance-sheet. Popular discontent with contracts that offered little flexibility contributed to their falling out of favour. In one recent example, Sheffield council may have to compensate a public-maintenance contractor after protests stopped the firm from felling trees.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.