25 The Treasury, through Infrastructure UK, faces a number of challenges to identify the best funding models for projects now being developed. The Treasury has formed Infrastructure UK to oversee infrastructure investment in the UK, including aspects of Government capital spending. It will face important challenges regarding the prioritisation of projects and procurement methods given the large deficit in the public finances and the increased cost of using private finance.
26 There are alternative financing options to PFI. Projects such as the Olympics and Crossrail have relied on, or will be using, a greater input of public money. There were other financing options, and although these would not have been likely to achieve the Government's policy objectives in 2009, they could be relevant in future:
• The French government guarantees 80 per cent of the debt, once a project is operating successfully, to reduce the use of bank risk capital and therefore financing costs. The disadvantage is that this approach is not a temporary or reversible intervention and retains some operating project risk for the public sector.
• The not-for-profit European Investment Bank (EIB) is generally able to make funding available on more favourable terms (such as margins and fees) than commercial banks. Some European countries have used public loans in a similar manner.