"Discredited" PFI escapes with a makeover The future of PFI is under renewed scrutiny this week after Andrew Lansley said he would place a lossmaking NHS trust into administration as two PFI deals left it burdened with £61m a year in debt repayments By Gill Plimmer, Jim Pickard and George Parker George Osborne is facing awkward questions after a year-long search to replace the government's unpopular private finance initiative has failed to deliver a revolutionary way of raising money for new schools, prisons and hospitals. Nearly 12 months after the chancellor said he would find a "new delivery model" to replace PFI, the scheme is expected to be given a new breath of life in a remodelled version that includes only minor changes. The expected revival comes even though Mr Osborne called PFI "discredited" and Nick Clegg, now deputy prime minister, branded it "a bit of dodgy accounting" before the 2010 election. An announcement is expected at the end of October, with details of schemes to be fast-tracked under the new-look PFI due with the autumn statement on December 5. Changes include stripping out services such as cleaning, catering and security from the 25 to 30-year contracts in a bid to keep a tighter control on costs. In a plan still being discussed with industry, the government is also considering investing a small amount of public capital into PFI projects. Although the amounts involved would be small, this would ensure the government a seat on the board of any project, raising corporate governance standards and easing fears that the schemes are in the hands of private financiers. The main elements of the new PFI projects look set to remain the same. The private sector will still enter into long-term deals to design and build roads, hospitals and schools, with essential maintenance such as roofing included in the contracts. They will continue to be financed by private debt and equity paid for by a revenue stream from government rather than users. Schemes will in many cases continue to be off the public sector's balance sheet. The failure to come up with a more radical replacement will anger campaigners who had argued for PFI projects to be scrapped altogether after a series of trenchant reports suggested it offered poor value for money. "The new system is likely to still transfer all the problems with the old PFI such as the lack of real risk transfer, large private profits and a lack of transparency," said Margaret Hodge, chairman of the influential public accounts committee. High interest rates charged by private sector providers mean that projects are being paid for several times over. According to Treasury figures 717 PFI contracts with a total value of £54.7bn are currently under way across the UK but the overall ultimate cost will reach £122bn by the time they have been paid off over the coming decades. Fast action on PFI is considered crucial to the government, which has made construction a key plank of its growth strategy since coming to power two years ago. Industry has been increasingly frustrated by the slow pace of decision making with thousands of projects stalled as a result of the PFI review, and the two national infrastructure plans announced since its election in late 2010 failing to translate into action on the ground. Richard Threlfall, partner at KPMG, said there were few alternatives to PFI for the government: "The industry has been waiting for a long time for the outcome of the review but it will be good news if the core principles of PFI are retained." The Treasury said no final decisions had been taken. The government's fundamental review of PFI aims to deliver a new, better value and more transparent model, which will ensure a fairer deal for the taxpayer now and for the long term. The review will be published in due course," it said.