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Privately Financed Capital in Public Services


  • Heald, David


Recent changes in UK policy, notably the retirement of the 1981 Ryrie rules, presage a substantial increase in the use of private finance for public sector projects. The most important features of the relaxations of 1989 and 1992 relate to: successive modifications of the value-for money tests, notably, in connection with removing the requirement for a systematic comparison with a hypothetical publicly financed project (e.g., when the private sector can be directly remunerated by user tolls); less stringent rules on leasing; and allowing private borrowing on the security of Exchequer-funded assets. The crucial issues are identified to be: the extent of private finance and the implications for macroeconomic indicators; whether the hypothesized operational efficiency gains are sufficient to offset higher financing costs; whether risk is genuinely transferred to the private sector; and whether risk ought to be transferred to the private sector. Copyright 1997 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Heald, David, 1997. "Privately Financed Capital in Public Services," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(5), pages 568-598, December.
  • Handle: RePEc:bla:manch2:v:65:y:1997:i:5:p:568-98

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    References listed on IDEAS

    1. Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
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    Cited by:

    1. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2015. "Soft Budgets and Renegotiations in Public-Private Partnerships:Theory and Evidence," Working Papers wp408, University of Chile, Department of Economics.
    2. John Hall, 1998. "Private opportunity, public benefit?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 121-140, May.
    3. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2015. "Soft Budgets and Renegotiations in Public-Private Partnerships: Theory and Evidence," Documentos de Trabajo 317, Centro de Economía Aplicada, Universidad de Chile.
    4. Malcolm Sawyer, 2010. "Public Private Partnerships, the Levels of Public Investment and the New Member States," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(3), pages 494-512, September.
    5. Mackie, Peter & Smith, Nigel, 2005. "Financing Roads in Great Britain," Research in Transportation Economics, Elsevier, vol. 15(1), pages 215-229, January.
    6. Robert Bain, 2010. "Public sector comparators for UK PFI roads: inside the black box," Transportation, Springer, vol. 37(3), pages 447-471, May.
    7. Magazzino, Cosimo, 2009. "Wagner's law in Italy: empirical evidence from 1960 to 2008," MPRA Paper 25526, University Library of Munich, Germany.
    8. Froud, Julie, 2003. "The Private Finance Initiative: risk, uncertainty and the state," Accounting, Organizations and Society, Elsevier, vol. 28(6), pages 567-589, August.
    9. John Quiggin, 2004. "Risk, PPPs AND THE Public Sector Comparator," Australian Accounting Review, CPA Australia, vol. 14(33), pages 51-61, July.

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