The Labour government committed an extra £1bn to PFI schemes last year as it attempted to kickstart the private financing of infrastructure projects, auditors have found

The National Audit Office said the Treasury Infrastructure Finance Unit, set up last year in response to a collapse in PFI funding, reactivated the lender market for PFI and was value for money “in the short term”.

However, the auditor found that by giving priority to closing deals at the prevailing market rates, the unit may have committed the public sector to extra costs of between £500m and £1bn. Thirty-five deals were signed after the unit was set up.

MP Margaret Hodge, chairwoman of the Committee of Public Accounts, said: “We are locked into these costs for generations to come.”