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Government withdraws £1.98 billion PFI funding

Councils face a battle to fund major regeneration projects after the government announced it is to withdraw almost £2 billion of housing private finance initiative credits.

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The Communities and Local Government department revealed on Monday that pipeline projects which have been allocated credits but not had their business case approved, will not now receive funding.

All 11 round six PFI projects will have their allocations, totalling £1.76 billion, removed. Two more projects, an extra care scheme in Cheshire, and Manchester Council’s 1,300-home Collyhurst scheme have also had their PFI funding cut.

The decision will leave authorities having to develop an alternative means of funding the refurbishment of estates and new homes. The Homes and Communities Agency has pledged to work with councils to help them develop other options.

A total of 13 projects in procurement which have been allocated £1.2 billion will be reviewed for value for money and could also face having their credits removed, with decisions made next month.

Richard Hill, a partner specialising in public private partnerships at legal firm Norton Rose, said: ‘I’m quite surprised, I thought a few round six projects would survive, given the way they have been trailed and the fact that housing PFI has been relatively successful.’

Phillip Woolley, a partner at Grant Thornton, said councils should look at joint venture structures as an alternative to PFI.

Southwark Council in London had been allocated £180 million of credits which would have been used to fund the provision of 943 homes on its Aylesbury estate.

Fiona Colley, cabinet member for regeneration, said: ‘We will continue to explore every option available to us and will in no way be defeated by this decision.’

Birmingham Council will lose £100 million which would have been used to build 549 new homes on three estates, Pitts Farm, Court Lane and Lyndhurst. A further 337 homes on the Lyndhurst estate would have been refurbished.

John Lines, cabinet member for housing at Birmingham Council, said: ‘We will find another way to fund the work.’

The future of housing PFI was first thrown into doubt in June following a National Audit Office report which showed that the cost of signed-off projects was £694 million more than expected. Housing minister Grant Shapps said then that the government would look at whether housing PFI represented value for money.


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