FINANCING TRANSPORT INFRASTRUCTURES

This article discusses the role of the UK Government's Private Finance Initiative (PFI) and the Private Finance Panel (PFP) of the Bank of England in financing transport infrastructures. The PFI aims to promote a partnership between the public and private sectors, so that the UK's capital stock can be renewed more quickly and effectively than could be done by either sector on its own. The PFI shifts the public sector from providing services to purchasing services, but with economies resulting from private sector management and disciplines offsetting the higher cost of capital. The 15 members of the PFP come from both sectors, and have been asked to implement the PFI; they act as brokers and catalysts between the two sectors. The article comments on the political, attitudinal, structural, and financial factors that make the PFI inherently difficult. The PFI needs to have the correct process as well as the right principles, and requires a business-like management. Progress in implementing the PFI has inevitably been slow. In transport infrastructure, the PFP's one success so far has been to enable London Underground to purchase new trains for the Northern Line. The PFP aims eventually to work itself out of a job. For the covering abstract see IRRD 871197.