Osborne has announced a “fundamental reassessment” of PFI as the Government draws-up its plans to provide a £50bn boost to construction using private funds for projects.
PFI has come under fire for lumbering the taxpayer with huge bills following building work.
The Treasury said the review will aim to create a new model for using private-sector expertise to deliver public assets and services at a lower cost to the taxpayer.
Projects could be funded by the Government then sold on to the private sector.
Osborne said: “We have consistently voiced concerns about the misuse of PFI in the past and we have already taken steps to reduce costs and improve transparency.
“But the review I have announced today will take this a step further with a fundamental reassessment of PFI.”
The move dovetails with Government plans to tap-in to pension fund cash and money held by insurance companies to fund new infrastructure and housing schemes without increasing public debt.
Further details of the review and plans to increase construction investment are expected during the Autumn statement on November 29.