The Chancellor will use next week’s Budget to consult on the future of PFI – the Private Finance Initiative – in a dramatic U-turn by the Tories.
Sources claim that in the wake of the collapse of outsourcing giant Carillion earlier this year, the Treasury wants to see whether PFI schemes represent “real value for money”.
Under PFI, the state hires contractors such as Carillion to build and deliver projects – then lease it back for a set annual fee.
But under Labour, more than 500 schemes ended up costing taxpayers five times the original building cost. In 2011 one hospital was being charged £333 by the PFI provider to change a lightbulb.
Industry insiders claim that while the Chancellor’s review won’t “re-write” previous PFI deals, it could kill off PFI “for good”.
Other financing schemes such as the National Infrastructure Bank would then be used for projects in the future.
A source told The Sun: “We’ve heard the Government would quite like to review previous PFI deals, not least Labour’s ones, but it’s legally impossible.
“But the Chancellor wants to review whether it’s the right way forward in the future. PFI gets a project off the Government books, but it also means they lose control.”
PFI was launched by Sir John Major’s Conservative government 1992 before exploding under Tony Blair’s Labour. There are an estimated 716 PFI contracts with a capital value of £60 billion up and running.
The Department for Transport is using PFI to finance a bypass around Stonehenge. The Treasury last night declined to comment ahead of the Budget next week.
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