The Lost Billions investigation: Private Finance Initiatives explained in easy terms

JPIMedia Investigations has reported on the explosion of the Private Finance timebomb
JPIMedia Investigations has reported on the explosion of the Private Finance timebomb

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.

The 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. It continued under the Tories before then-Chancellor Philip Hammond put a stop to it last year.

But 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.