The Treasury is set to include clawback provisions to be included in refinancing deals. It is understood that a series of new guidelines will be published with the aim of ensuring profit is shared between contractors and clients.
The move has sparked concern among contractors and their backers that the PFI could be ruined by overregulation.
One contractor said: "If there was too much of a clawback it would just kill it off. You would be putting more and more risk on contractors and taking away the upside." Insiders claim there is a battle between the government and equity providers over the terms of such clawback clauses.
One said: "It's one of the most political issues in PFI. Contractors are portrayed as feckless capitalists who are not only allowed to charge for building hospitals but carry away more swag when they refinance them. There is a risk that the government could overreact on this issue." One PFI financial backer said there was no need for new guidance as limitations on refinancing were already being used in the new wave of PFI hospitals.
He said: "Contractors cannot refinance without the consent of the authority overseeing the deal. It has worked perfectly well on an ad hoc basis." The Office for Government Commerce is due to publish the guidelines in the next session of parliament. It is working with PFI body Partnerships UK on what they should contain.
A source close to the OGC allayed fears about the guidelines. He said: "There is no hidden agenda. They will offer clarity for PFI bidders." The source said he was not sure whether the OGC would go through formal consultations with PFI contractors or speak with them informally.
Last year, contractors were criticised by Labour MP Alan Williams for the refinancing deals they entered into on the first wave of PFI projects.
Williams, a member of the Public Accounts Committee, threatened to name and shame deals that failed to include sufficient clawback clauses. These included Fazakerley prison, completed by Carillion and Group 4, and the £94m Dartford & Gravesham Trust hospital, which was also built by Carillion.
The National Audit Office found last year that Carillion and Group 4 made £13m extra profit by refinancing the Fazakerley deal (see box).
The study by Jon Sussex, a former Treasury economic adviser on health, said the argument that PFI permits more investment than conventional funding was a red herring.
It said: "There appears to be no macroeconomic reasons for preferring PFI to Exchequer financing, or of regarding one approach as any more affordable than the other." Sussex argues that although PFI improves maintenance and minimises construction time, it also involves additional costs, especially that of borrowing from private lenders.