Osborne to replace PFI with 'better value' model

The government is to undertake a ‘fundamental reassessment’ of the use of PFI contracts in order to cut costs.

As Building predicted last month, the Treasury will review the pros and cons of PFI with the aim of creating a new model to harness private sector expertise to deliver public assets and services at a lower cost to the taxpayer.

Although PFI – introduced by then Prime Minister John Major in 1992 – has delivered large projects on time and budget, it has been heavily criticised for landing the taxpayer with huge bills, which take decades to pay off.

Around 800 PFI contracts are currently in operation with a combined capital value of about £64bn.

Speaking yesterday, Chancellor George Osborne said: “We have consistently voiced concerns about the misuse of PFI in the past and we have already taken steps to reduce costs and improve transparency. But the review I have announced today will take this a step further with a fundamental reassessment of PFI.”

Osborne said the government wants “a new delivery model which draws on private sector innovation, but at a lower cost to the taxpayer and with better value for public services”.

The Treasury told the BBC that the new model would access a wider range of financing sources and strike a better balance of risk between the private and public sectors. A spokesman added that ministers hope to retain the benefits of the PFI model.