Monday 29 October 2018 4:15 pm

Government to ban private finance initiatives for future public sector projects after Carillion collapse


The government will abolish the use of private finance initiatives (PFI) to fund future projects, chancellor Philip Hammond announced today. 

The announcement in Hammond's Autumn Budget, the last before Brexit, comes after the collapse of construction giant Carillion put the controversial funding model in the spotlight. 

"We will honour existing contracts, but the days of the public sector being a push over must come to an end," Hammond said today.

"We will set up a Centre for Excellence to actively manage these contracts in the tax payers interest … and we will go further, I have never signed off a PFI contract as chancellor and I can confirm today that I never will.

"The government will abolish the use of PFI and PF2 for future projects putting another legacy of labour behind us."

Analysts were critical of the decision to scrap the source of financing for public infrastructure. 

“With a huge infrastructure backlog in the UK, the Chancellor seems to have closed his options for a potential source of financing, which means the Government will need to commit to substantial public funding to ensure continuity of programmes directly impacted by the announcement, such as A303 upgrade at Stonehenge and the Lower Thames Crossing,” commented EY infrastructure partner Manish Gupta. 

Sharon Renouf, a partner at law firm Bevan Brittan, said: "There must now be a question about how future infrastructure will be delivered if not via PFI or PF2.

"It seems unlikely that the need will be met with public sector capital so new models will need to come forward to address the gap."