Osborne to target savings from PFI deals: report

The Chancellor of the Exchequer is looking to cut hundreds of millions of pounds off the cost of thousands of private finance initiative deals, according to a report in the Independent on Sunday.

George Osborne is understood to have targeted potential savings from "expensive and inflexible" deals with contractors.

The paper said Treasury officials had met "major equity holders and other key industry players" – including those responsible for schools and hospitals – and urged them to cut their annual charges for rental and service charges.

Local authorities are to be given guidance about where they can find savings in their own PFI deals.

The move mirrors the approach taken by Cabinet Office Minister Francis Maude, who has cut £500m from charges made by government contractors.

A Whitehall source told the Independent on Sunday: "The PFI system presents some of the greatest opportunities for savings, but we have to be careful to do it with the agreement of the contractors because we cannot breach existing contracts."

The Chief Secretary to the Treasury, Danny Alexander, warned that PFI deals were "not immune" from the cuts process. He added: "Officials have met with the major equity holders and other key industry players, including those responsible for schools and hospitals... to discuss options for savings."

Tory MP Jesse Norman told the paper that a reduction of just 0.05 per cent in contractors' fees could save £500m a year.

Norman said: "The industry really needs to come to the table and start having a conversation about this. There are significant benefits for the organisations involved. They can't hide their heads in the sand over this issue."