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£13bn plan to rescue London PFI Projects
Paul Waugh, Deputy Political Editor3 Mar 2009
projects to build new prisons, schools and homes in London are to be rescued by the Government after the credit crunch threatened their completion.
Treasury Chief Secretary Yvette Cooper today confirmed that up to £13billion of taxpayers' cash will be used to salvage a string of privately financed infrastructure schemes threatened by the lending squeeze. Among the PFI deals in danger are a high-security prison in Belmarsh, schools in Greenwich, housing developments in Lambeth and street lighting projects across Croydon and Lewisham.
In an announcement to Parliament, Ms Cooper said that the projects were needed as part of the Government's plan to spend public cash to create jobs in the downturn. She said: "We need to get these important infrastructure projects moving quickly to support jobs right now. That's why Government is stepping in to accelerate the process and safeguard these major projects in the face of financial market problems."
A new unit in the Treasury, run as a private limited company to get round Treasury lending rules, will lend to projects at market rates.
There are 110 projects with a capital value of £13 billion currently being tendered to the private sector under PFI schemes but the Treasury hopes that only £2 billion will be needed this year. The sums spent could increase over time if bank lending remains constrained.
But shadow chancellor George Osborne said that the injection of taxpayers' cash looked like "applying a sticking plaster to Labour's failed PFI model", and Liberal Democrat treasury spokesman Vince Cable dismissed it as "a ludicrous charade" adding that it would be better "simply to accept that these are core public investment commitments".
Jeremy Barker, a director for global infrastructure at KPMG, said the idea "is potentially at odds with the philosophy underlying the PFI".
Reader views (10)
I see the 'usual suspects' are trying to push this onto the Tories. Wake up bozos - NuLAb have been in government since 1997 and vastly expanded PFI so they could keep excessive spending 'off the books'. These deals were supposed to transfer risk to the private sector but as usual with this incompetent government, the taxpayer will now pay the butcher's bill.
- Andrew E, Leaving the sinking ship England, 03/03/2009 18:38
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Picking up on Jeremy's comments. If I'm not mistaken all PFI projects should be appearing on the Government's books in the new financial year. I believe this is part of Whole of Government Accounts (WGA).
- Paul Andrews, London, 03/03/2009 16:22
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i've been privately financing a few of my own pet projects
which seem likely to run into financial problems. i wonder if somebody could let me know where to apply for a taxpayers bailout? i can assure you i am a very deserving case and would be very appreciative.
- M.O'Brien, london.uk, 03/03/2009 15:33
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Again Vince Cable is the only man talking sense here. Obviously investing in these schemes is a good thing - they're needed and it's the right way to help tackle the recession. Pretending there's nothing wrong with PFI and going to ludicrous extremes to try and prop it up is very silly indeed - just admit the magic money pot's dried up and if we want proper public services we need to fund them publicly.
- Tom, London, UK, 03/03/2009 14:41
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PFI projects, like future Public Sector Pensions are NOT included in the Government debt figs. So we all owe even more money now than we thought we did this morning.
- Jeremy E, London, 03/03/2009 14:31
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It's a bit rich that George Osbourne describes PFI as a Labour Policy when the last Tory government introduced it and Labour adopted it lock, stock and barrel. Does he think the electorate stupid or is his own memory failing him? PFI is exactly the same as taking out a mortgage to build a house, taxpayers will be paying for these rushed and often poorly designed projects for two generations.
- Nick, London, 03/03/2009 14:18
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Most of these 110 "projects" wouldn't be in Labour controlled areas would they?? Cynical of me I know, but after 11 years of this Nu-Labour crowd you can't really blame me can you?
- Malcolm, London, 03/03/2009 13:47
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This blows the governments credibility to shreds over PFI, if it ever had any. The whole point of the ridiculous and expensive scheme was supposedly so that the private sector would take on the risk of these projects failing. So as soon as failure threatens, the good old taxpayer steps in to bail out yet more failed private companies. How ministers can keep up the pretence that PFI works is beyond me.
- Tony, London nw2, 03/03/2009 13:15
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The public services always cost more to the taxpayer when supplied by the private sector. The taxpayer pays more and gets less. Services are not improved as relatively little public money actually reaches the frontline where it is most needed. Instead, the money is swallowed up by the layers of private companies now involved in the public sector. PFI is one of the main reasons why the public finances are in such a mess. The Government refuses to see this in order to stick to its ridiculous Tory-inspired obsession with the private sector as being the sole answer to any problems in the public sector. I'm surprised George Osborne has spoken out against it, though, wholesale privatisation of the public services being Tory policy after all.
- Royston, London, 03/03/2009 11:51
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"A new unit in the Treasury, run as a private limited company to get round Treasury lending rules, will lend to projects at market rates".
In the long gone days when I was an articled clerk, I always remember the senior partner looking over his glasses and, slowly and deliberately, reading out some fundamentally inept remark that I had written. "Consider this, Robinson. How sensible will this sound when read out at our committal proceedings?" Now read the above quotation from the article again.
- Bob Robinson, Parsons Green, 03/03/2009 10:14
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