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The Treasury has reaffirmed its commitment to private-finance initiatives, which have been hit by the global banking meltdown. A briefing to senior civil servants, obtained by LocalGov.co.uk's sister title,The MJ, has revealed the Government is standing by PFI schemes, which have been hit by the drying up of capital on the lending markets. Major schemes, including Building Schools for the Future and Crossrail, had been delayed because cash for new lending had dried up due to the global banking collapse. Other projects, such as the 2012 Olympic village, have also been hit and small initiatives, including roadworks, have been shelved. Political opponents of the scheme have long-argued that PFI costs outweigh any possible gains, and that the cuts in public spending mean alternatives, such as borrowing directly from markets, should be used instead. But officials from the Treasury told senior colleagues from other departments last week that once markets returned to normal, they would continue with the initiative. ‘The important thing is that we go on with PFI,' they said. The Treasury is working on the basis that lending levels will return to normal by the beginning of next year. The briefing explained: ‘Over the last year, funding has been in short supply. It won't stay like that forever. ‘If the forecasts are right, that will change quite quickly, once the financial sector starts to behave more normally. ‘The reason we're doing PFI is for risk management and better quality of project management. That only works if risk is genuinely transferred. ‘It's not a way of financing projects – that could be done cheaper. The reason for doing it is to improve the value management.'

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FINANCE

Carry on PFI – Treasury sticks to its guns over new schemes

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