A future Labour government would bring billions of pounds worth of contracts signed under the controversial Private Finance Initiative back into the public sector, John McDonnell, has announced.

Delivering his keynote speech at the Labour Party conference in Brighton, the Shadow Chancellor said it was a "scandal" that PFI deals would result in nearly £200 billion paid to private companies from the public sector over the next few decades.

Under Jeremy Corbyn's leadership, Labour had already promised not to sign any new PFI deals but Mr McDonnell won rapturous applause as he told delegates: "We will go further. I can tell you today, it's what you've been calling for, we'll bring existing PFI contracts back in-house."

He went on: "As early as 2002 this Conference regretted the use of PFI. Jeremy Corbyn has made it clear that, under his leadership, never again will this waste of taxpayer money be used to subsidise the profits of shareholders, often based in offshore tax havens.

"The Government could intervene immediately to ensure that companies in tax havens can't own shares in PFI companies, and their profits aren't hidden from HMRC. We'll put an end to this scandal and reduce the cost to the taxpayers," Mr McDonnell added.

But Conservatives denounced the Labour plan as "unaffordable" while the Institute for Fiscal Studies, the independent think-tank, said taking back the contracts would cost "an awful lot" in upfront payments.

Peter Dowd, Labour’s Treasury spokesman, claimed the policy would be "pretty self-funding" in the long term as the state would no longer have to pay out huge sums each year to contractors.

He admitted it was too early to say what the upfront cost would be but Mr Dowd insisted it would not run into "billions and billions".

Aides later said that a review of all PFI deals south of the border, undertaken after Labour took power, was expected to find that most were appropriate for returning to public hands.

Mandatory bond-for-share swaps, approved by Westminster, would compensate the private firms involved.

According to the latest HM Treasury figures as of March that year there were 716 PFI projects worth almost £60bn.

Introduced by the Conservatives in the 1990s, PFIs were greatly expanded under the Blair Government. The attraction was the speed at which public projects such as schools, hospitals and roads could be built. Instead of the taxpayer spending millions of pounds on projects, private consortia would take them on and run them for a set number of years.

However, the policy has led to complaints that the NHS and other public bodies have been forced to pay many times the original value of properties over the course of decades, while the contracts are frequently sold on by the original consortium.

In Scotland, the SNP last month denounced what it described as “Labour’s toxic legacy” of PFI contracts after official figures confirmed payments had risen to over £1bn per year for the first time.

Earlier this year, it was claimed NHS boards in Scotland faced paying back £10bn to firms for new hospitals that cost just £2bn to build under PFI. One, the Royal Infirmary of Edinburgh, will cost the public purse around £1.4bn over the course of a 33-year contract.

Richard Leonard, the MSP seeking to succeed Kezia Dugdale as Scottish Labour leader, praised Mr McDonnell’s speech, saying: “John McDonnell is right it is time to end PFI waste. The Scottish Government should lead the way…

“Scotland has a huge liability to PFI and the Scottish Government’s Non-Profit Distributing scheme. The Scottish Government could and should set up a debt disposal department dedicated to raising funds to buy out the total outstanding £28.8bn PFI and NPD debt on operational contracts.

“Doing this could save the public purse hundreds of millions of pounds. If I’m Labour leader I’ll be pressing them on this issue and as a Labour First Minister it will be a priority,” he added.