PFI — more to do over cost concerns

The government has not done enough to address concerns that the Private Finance Initiative (PFI) is being used to keep the cost of major infrastructure projects off its balance sheet, the House of Commons’ Treasury select committee has said.

The committee was commenting on the government’s response to the MPs’ August 2011 report, Private finance initiative. That found no convincing evidence that savings and efficiencies made during the lifetime of PFI projects could offset the higher cost of using private capital rather than government borrowing.

Committee chair Andrew Tyrie said that “anomalies” in the national accounting system continued to provide an incentive for departments to opt for this financing option, as PFI liabilities do not currently count towards the national debt. Departments can also keep PFI spending off their own individual budgets.

However, the committee recognises that ministers have begun to review the transparency of the financing system and the methods used to determine whether it provides value for money.

To increase transparency, PFI liabilities were included in the first unaudited Whole of government accounts, published in July, the government said. The coalition also explained that it was making improvements to ensure a “more robust” process would be used to determine whether the PFI was the best choice for a project. As part of this, the Treasury plans to publish revised value for money guidance later this year.

www.publicfinance.co.uk/news/2012/01/pfi-still-being-used-to-keep-costs-off-balance-sheet/