A £4bn government bail-out of the the Private Finance Initiative/Public-Private Partnership (PFI/PPP) might be needed to safeguard infrastructure projects, according to an industry insider.
Under the scheme, private companies pay for the construction and maintenance of the projects in return for state payments over 20 to 30 years.
This was intended to protect the taxpayer from any time or cost overruns. But Tim Pearson, PPP Forum spokesman and boss of private equity firm Innisfree, said that firms may need state help with the funding they would normally get from banks.
Money may be available from the European Investment Bank and equity investment may be increased, he said, but this could still leave a funding gap of up to 40%.
It is thought that Chancellor Alistair Darling might use his 22 April Budget to announce changes to PFI funding arrangements as the recession worsens.
But opposition parties said he should “go back to the drawing board” rather than use taxpayers’ money to take the place of missing private cash in PFI projects.
Copyright © Press Association 2009
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“If the public is to assume risks equity must be shared and interest charged on any loans to PFI firms possibly by adopting the NHS LIFT model” – David Dawson, Suffolk
“Heads they win tails we lose! The risk associated with the PFI schemes was intended to be with the private partners to protect the public. Now the risk has materialised, the public pay again …” – Name and address withheld
“I thought the billions of pounds of taxpayers’ money that has already been injected into the banking system was supposed to enable the banks to lend money as they had done previously. It would be wrong to bail these companies out further from the public purse. Let’s face it – they stand to make a handsome profit from these PFI deals …” – Andy Button, Reading
“Only if it is a relatively short-term loan at a reasonable rate of interest” – Allan Stewart, Wirral
