Credit crunch stalls £2.4bn of healthcare and schools projects

More than 100 schools and health projects have been delayed or put on hold because of trouble raising private finance.

An estimated £2.4 bn worth of healthcare and Building Schools for the Future projects are affected as well as the Government's plans to rebuild sixth-form colleges under a separate initiative run by the Learning and Skills Council, according to a report in the Times today.

Among the schemes having problems raising finance are the M25 widening, a big waste plant in Manchester and several hospital schemes. The Government's £45bn programme to renovate 3,500 scondary schools, half of whichare PFI, is facing serious problems finding finance, although recently several banks have come together to agree a finance package for some schemes.

The Government has called in trouble-shooter Sir Andrew Foster, former chief execuitve of the Audit Commission, to investigate why projects operated by the LSC have run out of money. Colleges had to find part of the finance for projects before they received grant funding. According to the Times report some colleges went ahead with their plans, expecting the Government to come up with an estimated £1bn bail-out.

The LSC has been forced to freeze its funding programme for sixth form colleges for three months. At least 42 colleges are now said to be under threat.