Government to reveal plans for 'son of PFI' scheme

The government is expected to set out plans for a “son of PFI” policy in the autumn, after the controversial policy was mauled by an influential committee of MPs.

Construction industry sources said the Treasury had indicated the government will lay out its vision for funding major projects with limited government cash, possibly as early as the party conference season.

The Treasury has already said how it intends to rework existing Private Finance Initiative (PFI) schemes to make them cheaper for the taxpayer, but, despite both chancellor George Osborne and prime minister David Cameron making their dislike for PFI clear, the coalition has not yet said how it expects the planned £400bn of future infrastructure projects to be funded.

A senior source said: “We’re being told privately to expect a ’son of PFI’ announcement in the autumn. It will be more standardised and procurement will have to be slicker, taking advantage of economies of scale. But exactly how it will be structured remains unclear.”

PFI was first used under John Major’s administration in the nineties as a way to get the private sector to finance new infrastructure up front, with the public sector then renting the service back over 25-30 years.

The government is known to be considering other types of public private partnership to allow continued private sector investment, including the regulatory asset base model, in which the government effectively uses a regulator to guarantee a future income stream for a service. There is also discussion about how much risk should be transferred to the private sector under the deals.