Private finance initiative contractors will be paid £53.3m from Lewisham Council this financial year, it has emerged.

This comes after Chancellor Philip Hammond announced last month no further PFI contracts would be taken out, but all existing contracts will be honoured.

A public question addressed to Mayor Damien Egan has revealed the council will pay £53.3m to its PFI contractors in 2018/19, and will receive £39m of credits from the government.

This leaves £14.3m to be picked up by the council.

Through PFI contracts, private firms build, operate and run buildings that are leased back to the taxpayer under contracts of around 25 years.

Lewisham has several PFI schools, whose contracts have come under fire as they soak up more than 10 per cent of a school’s budget.

Unexpected PFI bills also make it difficult for schools to make a balanced budget.

Asking for more detail about the council’s PFI payments, former mayoral candidate John Hamilton enquired: “In a period of financial constraint such as we are currently experiencing, does the Mayor think the council owes a duty primarily to fund the public services which we need to make life in Lewisham a fulfilling experience and to give, in particular, our young people hope, a good education and opportunities to develop their potential through under-fives’ play clubs, youth clubs, libraries, sports facilities, careers advice – the very services which have been completely axed or had severe financial cuts in the period since he became a councillor?”

Mr Hamilton went on to ask that all existing contracts were annulled “in all cases where the payments to date equal or exceed the initial contract value so that the legality of this institutionalised loan-sharking can be tested in the courts?”

Mr Egan said the council always preferred in-source contracts, but said the council could not annul existing PFI contracts.

“If the council unilaterally annulled its PFI contracts it would face significant costs that would hugely disadvantage residents and greatly limit our ability to invest in services that residents rely on.

“These costs include the cost of continuing to fund the outstanding capital and debt costs; the annual service costs of maintaining these assets and running the services; potential loss of the PFI credits from government; and significant penalties for breach of contract,” he said.