Treasury expands PFI into schools orders big PFI expansion injection funding

THE TREASURY has ordered a huge expansion of the controversial programme to inject private sector cash into public sector projects, with education in the front line.

The Private Finance Initiative has so far attracted pounds 4.8bn of investment, including pounds 2.9bn for 31 hospital building projects. Ministers now intend to sign contracts worth pounds 12bn before the next general election.

Alan Milburn, the Treasury Chief Secretary, is to urge schools, colleges, the Ministry of Defence, police, fire services and local authorities to make much greater use of public-private partnerships for new building and computer projects. Government departments which drag their feet will be less likely to win extra cash from the Treasury's pounds 1.5bn reserve fund and for their spending plans in future years.

The move to inject private money into education will alarm some Labour MPs. But, as in the National Health Service, it would not be used to provide services directly. Mr Milburn yesterday told the Further Education Funding Council he wanted the scheme to be "as much a success story in education as it has been in health".

Mr Milburn, a leading moderniser, entered the debate over public services which last week provoked a public rift between Tony Blair and John Prescott. He emphasised that the Government believed in the public sector and the people who worked in it, but warned: "We also believe that our public services have to prove their worth. They have to dramatically improve their productivity, efficiency and performance."

The Treasury minister insisted that the much-criticised Private Finance Initiative had a key role to play in Labour's plans to modernise public services, saying the best way forward was often to "combine private sector enterprise with public service values".

He said that the initiative offered a better deal for taxpayers and better services for people. He hit back at critics of the scheme, who claim it involves "mortgaging the future" and would leave future generations with big bills. He said that the initiative is "about securing a better future... by providing modern high quality public service facilities for staff and public alike".

New guidelines to be issued today will say that assets financed under the scheme should normally return to public sector ownership at the end of the contract. "This further reform of [the initiative] will guarantee that the taxpayer inherits top quality, fully-maintained schools, hospitals and colleges capable of serving local communities for many years to come," Mr Milburn said.

The Treasury's plans to expand the scheme will also alarm Labour Party activists. Strong opposition emerged during a party-wide consultation exercise on health policy, with several constituency parties calling for the programme to be scrapped.