Treasury Unveils PFI Bailout Plan

Yvette Cooper, chief secretary to the Treasury, announced this week that the government would lend up to £13 billion to struggling PFI projects that have not reached financial close. It expects to lend between £1billion and £2billion during 2009 and 2010.

All projects will be able to apply for funding from the Treasury on a ‘co-lending’ basis. The government will provide loans which it anticipates being able to sell on at a later date.

The Treasury will only lend to projects where commercial funding is not available. Treasury head of PPP policy Gordon McKechnie said at a conference on Tuesday: “It would have made no sense for us to allow PFI projects that are shovel-ready to stall because of the current problems in the credit market.”

Schemes like the £5.5 billion project to widen the M25 is believed to be close to being finalised, with 19 banks having come up with around £1.2 billion to get it off the ground. Financial close is expected on 2 April.