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Government announces PFI cost cutting plan alongside new £2bn schools programme

The Treasury has announced a plan to deliver at least £1.5bn of savings across the 495 operational Private Finance Initiative (PFI) projects in England.

Treasury commercial secretary Lord Sassoon said the savings could be fully recycled back into frontline services by the contracting authority.

The plans follow pilot projects, at the Queen’s Hospital in Romford and two Ministry of Defence pilots, at Corsham and the Welbeck Defence Sixth Form College, which have confirmed savings opportunities of around 5 per cent of annual payments.

The Efficiency and Reform Group in Cabinet Office, supported by experts from the Treasury and Local Partnerships, will now lead a programme to secure the savings across the public sector through effective management of contracts, making efficient use of space and reviewing soft service requirements.

The Department for Education has also unveiled its replacement for the Building Schools for the Future (BSF) programme. The new procurement programme for privately financed schools will be known as the Priority School Building Programme and lessons from the savings pilots will be factored in.

Education secretary Michael Gove said the £2bn programme will be open to schools previously promised funding under the BSF programme.

“Individual schools, Academies and local authorities will all be able to apply and I am launching the application process today,” he said.

“The scheme will be rigorously policed to ensure we do not incur the excessive costs incurred by previous privately financed schemes. The programme should cover between 100 and 300 schools with the first of these open in September 2014 and is expected to be worth around £2bn in up front construction costs.”

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