Various Private Finance Initiatives (projects in which government infrastructure is built through private capital which is then paid back with exorbitant profits) are having trouble attracting funding, hence the government should put more money in them. That’s right, the state should provide the money to private investors so that they can then rake in the profits later:
But Tim Pearson, director of private equity firm Innisfree and spokesman for the PPP Forum, said private firms might need state help for funding that should have come from commercial loans.
“Because we are having problems raising the funding, what we are now looking at is alternative funding structures,” Mr Pearson told BBC Radio 4’s World This Weekend.
We need to be very careful about the taxpayer taking all the risks and the private partners taking all the benefits
Even with possible European Investment Bank funding and increased equity investment, there could still be a funding gap of up to 40%, he said.
“This is where the problem is, because although there is debt available, there is not much of it and the terms are much too expensive,” said Mr Pearson.
“This is where we are looking to talk with the government and say we can go ahead with this business, but it is more expensive.”
He said state funding would be “to some extent against the principle” of PFI, but added it was not fundamentally a problem.
Liberal Democrat Treasury spokesman Vince Cable, a long-time sceptic about PFI, said the government should go back to more traditional public financing structures rather than use taxpayers’ money to prop up the public-private model.
Meanwhile the banks the government has already partially or whiolly nationalised own a big chunk of the PFI market; wouldn’t it make sense to take away these projects completely, as part payment for the rescue of these banks? It’s more than a bit stupid to let one arm of government keep on paying another arm of government rather than actually invest it in much needed services. the banks would only use the money to pay bonuses with anyway.