Osborne set to unveil PFI reforms

Herald Series: The Chancellor is expected to announce changes to the PFI scheme and postpone a fuel duty rise in his Autumn Statement The Chancellor is expected to announce changes to the PFI scheme and postpone a fuel duty rise in his Autumn Statement

A "faster and more transparent" system to lever in private funding for public infrastructure projects is expected to be unveiled by George Osborne on Wednesday, Government sources indicated.

The Chancellor will use his Autumn Statement to detail reforms to the heavily criticised Private Finance Initiative (PFI) aimed at reducing taxpayer costs and risks.

Among the changes will be limits on the types of services such as maintenance included in contracts and more flexible terms allowing the state to opt out of others later.

Existing arrangements have been criticised as too generous to private contractors, with one hospital reported to have been charged £333 by a PFI firm to change a lightbulb.

Set up under John Major's government in 1992, PFI was expanded dramatically under Labour and has been continued under the present coalition administration. It allows private firms to build, operate and maintain public facilities like hospitals, schools and courthouses under contracts lasting as long as 35 years.

But it has faced harsh criticism over escalating costs, inefficiency and "perverse incentives" to use it over more cost-effective funding methods.

This week's mini-budget is expected to deliver bleak news for welfare claimants as well as the wealthy in the form of a possible benefit freeze and big cuts to pension tax relief.

Economists also expect Mr Osborne to make an humiliating climbdown over one of the coalition's key goals - to have debt falling as a share of national income by 2015/16.

He conceded at the weekend that it was "clearly taking longer to deal with Britain's debts, it's clearly taking longer to recover from the financial crisis than one would have hoped".

One move the Chancellor is tipped to make is postponing January's planned 3p rise in fuel duty. A survey of more than 13,000 users of a consumer website showed petrol prices were the biggest concern they wanted addressed.

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