The spending watchdog found that most PFI schemes used by councils to refurbish housing stock and provide new homes have overrun budgets and deadlines.

It reported that 21 of the 25 PFI schemes signed since the initiative's introduction over 10 years ago suffered spiralling costs, around half more than doubled in price.

All the projects for which information was available had been delayed - for an average of two-and-a-half-years.

Two PFI projects, one in Islington in London covering 4,000 homes and another in Manchester involving 1,500, both cost £100m more than the £60m estimated in their outline business case.

Mr Shapps said: "We can and must do better. Housing PFI plays a useful role in improving existing homes and providing new homes in areas of housing need.

"But we also have a responsibility to ensure every pound is spent wisely because of the huge deficit in public finances we have inherited.

"So as part of work already under way to take a close look at all of our planned spending on new homes, the department will take a fresh look, in the spending review, at how housing PFI can best offer genuine value for money."

The NAO report stated: "While the capital cost of PFI housing projects is similar to other developments, the Department's evaluation to date has not taken account of the full costs.

"Procurement also tends to take more time, which can increase procurement and tender costs for local authorities and bidders"