State to take on projects as private funding fails

The Government is to take on stalled infrastructure projects worth billions of pounds as private firms struggle to raise cash during the recession.

Treasury sources have revealed that ministers are considering plans to fund projects including the widening of the M25, and a waste plant in Manchester.

They said financial markets are in no state to support the long-term borrowing needed, so the Government has been forced to consider other options.

Nearly £2.4 billion of health and education projects are understood to be under consideration in addition to a multi-billion pound plan to rebuild sixth-form colleges.

There are also signs NHS Trusts are running into difficulties with their own developments because of liquidity problems. Officials admit a "significant number" of Private Finance Initiative schemes have been delayed because of the credit crunch.

Under the PFI scheme, set up by Gordon Brown during his time as Chancellor, banks or consortia lend cash for public projects for 25 years, and the Government pays it back in instalments.

The Prime Minister told MPs earlier today to expect an announcement on PFI within days.

The Government is under pressure to inject more capital into the public sector to ensure projects providing thousands of jobs go ahead.

In the autumn Chancellor Alistair Darling promised billions in spending would be brought forward from future programmes to help bring Britain out of recession.