As the Edinburgh schools show, PFI is a rather good idea

There're most certainly possible arguments to make against the Private Finance Initiative: there's more than a suspicion that it was used to allow large amounts of spending without having to trouble the government books with it for example. And yet there's still an obvious value to it:

Edinburgh council is refusing to pay the latest private finance initiative charges for the 17 schools shut down because of safety fears in a sharp escalation of the controversy over the potentially dangerous buildings.

With thousands of schoolchildren and teachers facing weeks of further disruption, council officials said on Wednesday they were withholding the latest £1.5m instalment of the private finance charge, invoking their legal rights under the PFI contract.

“We will not be paying them that this month,” a council spokesman said. “We’re applying all the contractual terms, and those include deductions for non-availability [of the schools].”

Someone, somewhere along the line, messed up. We're not really au fait with technical building terms but from what we've seen we assume that it was builders not being very good builders. And of course not very good builders not building very well is not a great advertisement for any scheme let alone the PFI.

However, we do need to consider that most important part of capitalism: bankruptcy. One of the reasons the system is so vibrant is that when the inevitable mistakes are made the mess is rapidly cleaned up. Your idea didn't work out? Oh dear. So, shift those potentially productive assets, the buildings, machinery and labour over to somewhere, someone, else who may be able to use them to add value.

That is, one of the joys of the system is how it springs into action when things go wrong. As here with the schools: those financially responsible for providing school buildings are now going to lose money for not providing school buildings. 


Proper enforcement of that contract is going to lead to people being very much more careful in future: exactly what we would like to happen.

The advantage of the PFI is therefore that we have clarity of responsibility.