The Prime Minister is set to take the unprecedented step of using taxpayers’ money to fund big private finance deals in order to accelerate building plans stalled by the credit crunch.

Taxpayers’ cash is to be injected into big PFI deals such as the M25 motorway widening project in a bid to get such multi-million-pound deals off the ground in the face of the banks’ reluctance to lend.

The Treasury is working on plans that could see an infrastructure fund created to provide, in effect, longterm bridging loans from the taxpayer to PFI projects. Alternatively, departments such as transport and local government, which sponsor the projects, may undertake the lending.

Hundreds of millions of pounds may be needed, with the Treasury aiming to recoup its debts when the projects are refinanced part way through their life. But until that point, the government would effectively be lending to itself to kick-start its own building projects.

Financial Times, Daily Telegraph