PFI, MIM, NDP, TFI – acronyms galore. But what do these big public finance systems mean in practice, and is the “made in Wales” solution to the PFI hangover – the Mutual Investment Model – as mutual and squeaky clean as the Welsh Government claims it is?
Responsibility for building new social infrastructure – like hospitals, schools and roads – has historically mainly lain with local government. As the cost of these projects increased due to higher design standards etc., many local authorities could no longer afford to do this kind of work.
Social infrastructure continued to see chronic under-investment during the post-war years – partly because the projects were too big for local government to handle (as mentioned); partly because the UK Government either didn’t have the money or couldn’t be bothered to invest in them.
Instead of letting the public sector handle this themselves, the Private Finance Initiative (PFI) was introduced by the Conservatives in 1992. This handed infrastructure project management to “more efficient” and commercially-minded private sector companies. Also, it gave the government access to private funding.
Labour stuck with PFI after coming to power in 1997 and it only started to fall out of fashion after the Great Recession.
