Chancellor Philip Hammond has called for an end to the private finance initiative for public contracts, pledging in his Autumn Budget speech to never sign another deal
Private finance initiative, and PF2, will not be used for any more government projects, Hammond said.
The Office for Budget Responsibility has identified private finance initiatives as a fiscal risk to the government.
Hammond told the House of Commons in his 2018 budget address: “I have never signed off a PFI contract as chancellor and I can confirm today that I never will. I can announce that the government will abolish the use of PFI and PF2 for future projects.”
Despite this announcement, existing contracts will be honoured.
However, in spite of PFI being declared officially abolished, the Treasury remains tied to privately financed infrastructure. The road network may be in the private sector for the time being, but energy and utilities have long been privatised.
The Treasury yesterday published its Interim Response to the National Infrastructure Assessment, which read: “The private sector has a critical role in delivering our infrastructure and investing to meet future challenges.
“Almost half of the investment in our £600bn infrastructure pipeline is projected to come from the private sector.”
The Chancellor kept the door ajar to public-private partnerships where it delivered the desired value for the taxpayer.
He said that Government would also continue to honour existing PFI deals but ended new PFI for good.
The decision raises questions around how the A303 Stonehenge road tunnel project will be financed.
Hammond said: “We will establish a centre of excellence to manage existing PFI contracts starting in the health sector.”
Currently, there are around £60bn of PFI contracts already in place with future charges on these deals expected to amount to £199bn of taxpayer’s cash.
