Last week Leeds City Council was planning to step in to plug a funding gap in the showpiece PFI housing project covering Beeston, Holbeck and Little London.
The plans – previously estimated to cost £180m – include refurbishment of 1,245 council homes, the construction of 388 new council properties to rent and environmental improvements.
Senior councillors have now voted unanimously to step in and provide 30 per cent of the funding, to be taken from their Housing Revenue Account reserves.
The rescue package would equate to around £50m costs to the taxpayer based on previous costings. It means that work could now start on the project in November.
According to previous data from HM Treasury, the council has taken on PFI debts of £2.2bn for 12 projects since the Private Finance Initiative scheme began.
Its repayments will peak at £95.6m a year in 2030, without including the costs of the Beeston, Holbeck and Little London project, or the planned PFI incinerator at Cross Green.
The development has already had to overcome a number of hurdles, including one of the three major lenders – a German bank – pulling out, and leading to fears the project might have to be slashed.
The majority of the scheme’s funding requirements will still be met by the two remaining lenders, Nationwide Building Society and the Co-operative Bank. Speaking at a meeting of the city council’s decision-making executive board, neighbourhoods and planning spokesman coun Peter Gruen admitted that there had been “difficulties” with the banks, leading to a “sea change” in how the local authority is approaching the project.
“Colleagues have received a number of papers over the past two years and it’s passed through the scrutiny of several Government departments,” he said.
“After a considerable effort to find another lender we concluded that it is too important a project to cut by a third. So we decided we would step in ourselves.
“The two remaining banks are content but this still has to go back to the treasury for approval. When we get this approval we will make all haste. People have waited too long.”