Philip Hammond has pledged to not sign any new PFI contracts after the collapse of the former industry giant Carillion at the start of the year escalated concerns about the government’s use of the PFI to build much of the UK’s hospitals, schools and roads.

Delivering his Budget, the chancellor also revealed a new centre of excellence would be opened to manage government PFI contracts, claiming there was little evidence to suggest that their use worked.

It comes after repeated calls from the opposition to abolish PFI contracts but Hammond told the House of Commons that 90% had been signed under Labour’s leadership and that today’s announcement “put another Labour legacy behind us”.

Speaking to MPs, Hammond said he had never signed a PFI contract as chancellor, and that the commitment meant he never would. The pledge comes 10 months after the demise of Carillion which had PFI contracts all over the country.

“Half of the UK's £600 billion infrastructure pipeline will be built and financed by the private sector,” the chancellor said. “And in financing public infrastructure I remain committed to the use of public-private partnership where it delivers value for the taxpayer and genuinely transfers risk to the private sector. But there is compelling evidence that the Private Finance Initiative does neither. We will honour existing contracts. But the days of the public sector being a pushover, must end. We will establish a centre of excellence to actively manage these contracts in the taxpayers' interest starting in the health sector.”

Earlier in the year, the National Audit Office, parliament’s spending watchdog, said in a report that the UK had been forced to fork out billions of pounds in extra costs for no clear benefit by using PFI to build much of its infrastructure.