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Treasury accused over PFI costs in 2009

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The Treasury has been slammed for allowing costs associated with the Private Finance Initiative (PFI) to reach £1bn during the economic crisis.

During 2008-09, when the state was bailing out the banks to the tune of billions, the banks were busy increasing the state’s cost of financing PFI projects by as much as a third.

The Public Accounts Committee said the Treasury also failed to re-negotiate bank loans for PFI during the period.

MPs on the committee said in a report that an extra £1bn of PFI debt was passed on to taxpayers.

Margaret Hodge, left, who chairs the committee, said: “We recognise that market confidence was helped by the Treasury setting up its own unit to lend public money on commercial terms where private finance was not available.

“But the Treasury could have done more. It did not use its negotiating position to press the banks to loan to infrastructure projects at lower rates.

“It also did not explore the possibility of alternative and cheaper sources of finance to reduce reliance on expensive bank financing. It is imperative that it does so now.”

The report also reveals that the high interest charges on PFI projects will be locked in for up to 30 years.

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