Treasury's new man to review the future of 'broke' PFI schemes

Taxpayers have coughed up £2bn to rescue projects as banks refuse to stump up more cash
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Charles Lloyd, the Treasury's newly installed head of public-private partnerships (PPPs), is to undertake a six-monthassessment to decide the future of the controversial private finance initiative (PFI).

Around £60bn has been spent in the healthcare sector alone since 1992 through the PFI. Recently, however, the programme has been hit by a funding crisis, as banks have refused to fund projects at reasonable rates, so forcing the Government to cough up £2bn in public money to rescue £13bn -worth of current PFI projects.

It is understood that Mr Lloyd, who started his 18-month secondment from PricewaterhouseCoopers at the start of March, has approached leading PFI specialists including the "big four" accountants – Deloitte & Touche, Ernst & Young, KPMG and PwC – to identify a candidate to run the review.

A PFI source said: "Charles is in the process of trying to find someone to do a piece of work on PFI. He needs to see if the concept is broke and needs fixing. Expectations are PFI will need tweaking or reassessing." The source added that Mr Lloyd hoped to get the candidate into the Treasury within weeks and that the review will be presented to ministers, for "a political decision" on what happens to the PFI.

A Treasury spokesman said: "No specific review is going on. But as we demonstrated with the announcement on 3 March we continue to make sure that procurement can take place while the market conditions are affected by the global credit crunch."

The Government's recent bailout of PFI has drawn widespread criticism, with the Liberal Democrat Treasury spokesman, Vince Cable calling it a "terrible, opaque and dishonest way of hiding obligations".

By last year, 12 major PFI projects had been dropped in the health sector.

The TUC's general secretary, Brendan Barber, said: "This rescue is another example of privatising the very good profits that many PFI companies have made but having to nationalise the losses now times are tough."

Scottish ministers last week released figures showing that the projected cost of PFI and PPP contracts over the period from 1997-98 to 2041-42 is £30m.

First Minister Alex Salmond, whose government scrapped PFI when it came to power in 2007, said: "This is the price of New Labour's 'age of irresponsibility'. PFI is collapsing south of the border as projects have to be bailed out, and in Scotland the costs are soaring towards £1bn a year."

The global downturn has put a number of high-profile PFI projects in jeopardy south of the border, including the £5bn upgrade of the M25. Doubt has also been cast on the Tube Lines consortium's modernising of the Jubilee, Northern and Piccadilly routes.

Last October the Government changed the rules on PFI, increasing the public's share of receipts it can claw back when projects are refinanced to 70 per cent.