How can PFI schemes be better value for money when the private sector cannot borrow money from the banks as cheaply as the Government can?
It is true that the Government can borrow more cheaply than the private sector, but determining value for money is not a simply about comparing interest rates. The additional costs of borrowing are more than offset by the private sector taking on the risk of construction cost and time overruns, using their ability to innovate and making more efficient use of resources. Capital expenditure forms on average just 22% of the total cost of PFI projects; the balance is the long-term cost of maintaining the building, replacing equipment and providing support services.
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