Labour offers reassurance on future funding of PFI projects

A Labour government will honour PFI transactions which have been completed before the General Election and will continue with transactions that are close to signing.

That was the promise from Alistair Darling, shadow chief secretary to the Treasury, to bankers and construction executives at a Herbert Smith seminar last month.

Darling also told the companies involved in PFI that there was a need to prioritise PFI projects. In the past, the Government has insisted that no public sector project would get public money unless the potential for doing the project under PFI was examined.

Andrew Preece, head of Herbert Smith's project group, who chaired the seminar, said: “A lot of time and money has been spent on examining projects that were found not to have a PFI solution. I think Darling was acknowledging the need to identify key projects and proceed with those first, so that a knowledge base is built up.” With NHS projects in particular, he said, there was the feeling that too many projects had been identified and that no standard legal template for drawing up the contracts had been established.

Darling also provided some comfort to the banks lending to PFI projects involving public sector bodies like NHS Trusts. He said that the Government would cover these bodies' debts should they go bankrupt, provided they fell “within the ambit of the public sector”.

Preece added: “Whether or not Labour will be prepared to grasp the nettle and actually produce a firm state guarantee remains to be seen. It clearly isn't a refined policy as yet.”