What makes this doubly important is that it demonstrates the importance of the Private Finance Initiative. With this, the private sector takes most of the overrun risk and consequently, overruns are much rarer. Left-wing attacks on PFI have claimed that it is no cheaper than direct public sector procurement. This is only true if you don’t factor in the overruns. In fact, an article in the Guardian a month or two ago claimed that including the likely overrun of a public sector project in the comparison was cheating rather than prudent accounting.

Complaints about private sector companies making a killing also miss the point. Because the private sector is subject to the risk, it also gets the reward if things go unexpectedly well. It is true that PFI contracts were once rather generously budgeted as they assumed public-sector levels of efficiency. However, things have got a bit leaner as the market has developed and super profits are a bit harder to come by nowadays. Overall, PFI has been a damning indictment of public sector waste and it is amazing that any direct procurement is still allowed.

Note, however, that the TPA figures must be taken with a large pinch of salt. The lower initial figures for public sector projects represent an earlier stage of planning than in the private sector. Thus, they cannot really be compared to a private infrastructure project for which costs are not publicised until a much later stage in the process – usually not until contracts go out to tender, if then.

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