VATLP02510 - Supply: Private Finance Initiative (PFI): what is PFI?

PFI is the Government’s way of encouraging the private sector to fund local and national infrastructure projects. PFI commonly occurs in the NHS, the education sector and in local and central government. The PFI provider will supply a total package in return for a single regular charge (often referred to as the “unitary charge”).

The PFI provider achieves a return on the initial capital outlay by either constructing a building that is then leased to the recipient with all relevant services over a period of time, or by acquiring an interest in an existing building which is then leased back to the recipient together with services.

The idea is similar to that of an individual or business leasing a car for a monthly payment over an agreed period of time. The monthly payment covers not only the lease of the car but all servicing, repairs and tax costs.