Osborne ‘will increase transparency’ in Private Finance Initiative

The Chancellor will use his Autumn Statement to detail reforms to the Private Finance Initiative (PFI) aimed at reducing taxpayer costs and risks.

Among the changes he will announce will be limits on the types of services included in contracts and more flexible terms allowing the state to opt out of others
later.

Existing arrangements have been criticised as too generous to private contractors, with one hospital reported to have been charged £333 by a PFI firm to change a lightbulb.

The taxpayer will also take a minority shareholding in the delivery companies to ensure a share in any profits and allow closer oversight.

A strict 18-month limit will be imposed on the procurement process, with cash being reallocated if the deadline is missed.

Efforts will be made to make the scheme more attractive to long-term investors, such as pension funds, in a bid to reduce the amount of debt involved in the financing.

The reforms will promise more transparency over future liabilities facing the taxpayer.

The new system is expected to be named Private Finance 2 (PF2).

Mr Osborne ordered a review of what he said was the “discredited” PFI system last year.

Set up under John Major’s government in 1992, PFI allows private firms to build, operate and maintain public facilities like hospitals, schools and courthouses.