Treasury officials must continue to promote co-financing deals for public infrastructure, despite shoring up the ailing private finance market using more government cash, an expert has warned.

John Tizard, director of the Centre for Public Service Partnerships, said he approved of the Treasury's decision last week to use public capital to kick-start the private-finance initiative (PFI) sector. But he urged public bodies to work harder to secure co-financing arrangements, despite the fact that private capital investment in school-building projects, for example, has dried up during the recession.

‘It is critical that the public sector contracts in ways that ensure the commercial disciplines of PFI. The pressure on contractors from the investor and financer, as well as the public sector, has brought discipline to PFI procurements. Any relaxation of these conditions could be detrimental to the public good,' Mr Tizard warned.

But Unison general secretary, Dave Prentis, said the Treasury's emergency action to shore up the PFI market would waste taxpayers' cash by supporting failing companies and rewarding them with continued profits.

Mr Prentis instead called on ministers to use their investment to keep major capital projects in the public sector.
‘Bailing out PFI now is just throwing good money after bad,' he said. ‘We have warned the Government over and over again that private companies were only in it for as long as the profits lasted.

‘There has never been a transfer of risk – it was not an option for the Government to allow school and hospital-building projects to go to the wall.'