The government has ruled out backing any future PFI projects valued below £20m, as the cost of the bidding process makes them uneconomic.
The move came as it was revealed by the Treasury that such schemes make up 60% of all PFI
projects but account for only 7% of their value. Most of the small-scale projects, such as libraries and leisure centres, are let by local authorities. The government said that new borrowing regimes would allow local authorities to borrow money directly to fund the projects.
The Treasury also this week reiterated its commitment to expand the PFI into regeneration schemes.
Speaking at the launch of a new document detailing the government's plans for PFI, chief secretary to the Treasury Paul Boateng said: "The benefits of good procurement are not confined to those sectors where PFI is already well-established. New applications for PFI will be explored where evidence suggests it could deliver benefits – in social housing, urban regeneration and waste."
Treasury investment in PFI will rise by £12bn between now and 2005-06. This will take the total investment in PFI to £47bn.Parliamentary spending watchdog the National Audit Office gave broad backing to two big PFI deals this week: the £311m Home Office headquarters in central London and the £1.2bn GCHQ in Cheltenham. This came despite the NAO finding that the price of the GCHQ scheme had increased 21% in the 21-month period between Carillion's appointment as preferred bidder and financial close, and that the Home Office building will not have enough space for its staff.