In response to the House of Commons Treasury Select Committee report on Private Finance Initiative (PFI) funding, published today, CIPFA has issued the following comment:
PFI should be only one of a number of options that is considered for major capital investment schemes, including traditional procurement and financing options. For value for money to be achieved it is vital that this option appraisal is carried out on a level playing field. PFI may still emerge as the best option where there are genuine opportunities for the private sector to harness additional benefits such as through co-provision of income generating services or economies of scale.
CIPFA believes that the control approach adopted in IFRS (International Financial Reporting Standards) and which is being developed for the public sector by the IPSASB (International Public Sector Accounting Standards Board) is the appropriate basis on which to account for PFI arrangements. These assets, and their related liabilities, should - in almost all cases - be on the public sector balance sheet. We therefore support the Committee's recommendation that the Treasury should consider aligning the treatment of PFIs in Departmental budgets with the treatment in financial accounts.
The recent publication of the Whole of Government Account extract included a reconciliation to National Accounts. This demonstrated the level of borrowing not included in the National Accounts, and emphasised the benefits that would arise from the National Accounts framework being more closely converged with international accounting standards such as IFRS and IPSAS.
Ian Carruthers, CIPFA’s Policy & Technical Director said:
“CIPFA supports the Committee’s recommendation to align the treatment of PFIs in Departmental budgets with the treatment in financial accounts – this control-based approach better reflects the Government’s true liabilities. Recognising the true liabilities will help create a level playing field where PFI becomes the preferred option only when it provides true value for money.”
CIPFA Press Office
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1. The Treasury Select Committee report on the Private Finance Initiative is available here: http://www.parliament.uk/treascom
CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications are the foundation for a career in public finance. They include the benchmark professional qualification for public sector accountants as well as a postgraduate diploma for people already working in leadership positions. They are taught by our in-house CIPFA Education and Training Centre as well as other places of learning around the world. We also champion high performance in public services, translating our experience and insight into clear advice and practical services. They include information and guidance, courses and conferences, property and asset management solutions, consultancy and interim people for a range of public sector clients. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. We work with donors, partner governments, accountancy bodies and the public sector around the world to advance public finance and support better public services. This includes the development of local professional qualifications in African countries like Lesotho and Nigeria and in Europe in post conflict states in the Balkans.