LONDON, Oct 29 (Reuters) - British finance minister Philip Hammond said on Monday he would abolish the use of Private Finance Initiatives (PFI) to fund projects, just months after the collapse of Carillion raised concerns about whether companies should be given the work.
The collapse of Carillion earlier this year, one of the biggest beneficiaries of such contracts, forced the government to step in to guarantee services ranging from school meals to roadworks that the company had previously provided.
“We will honour existing contracts. But the days of the public sector being a pushover must end,” Hammond told parliament in his annual budget.
“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.”
Launched by the ruling Conservative party in 1992, the use of PFI proved popular with successive governments because it enabled the state to fund new public infrastructure without the government having to raise the money up front.
There are currently over 700 private finance contracts in existence worth about 60 billion pounds. The annual cost of these projects was worth more than 10 billion pounds last year.
Even if no new deals were agreed, the cost of these projects would reach almost 200 billion pounds by the 2040s, a parliamentary watchdog said earlier this year.
Reporting By Andrew MacAskill; editing by Kate Holton