The Private Finance Initiative : sixth report, together with the proceedings of the Committee, minutes of evidence and appendices / Treasury Committee.

  • Great Britain. Parliament. House of Commons. Treasury Committee.
Date:
1996
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Licence: Open Government Licence

Credit: The Private Finance Initiative : sixth report, together with the proceedings of the Committee, minutes of evidence and appendices / Treasury Committee. Source: Wellcome Collection.

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    a result of the revenue expenditure implications of PFI commitments entered into by a diversity of organisations. 27. The particular concern is that by turning capital into current expenditure the costs of investment are passed to future years. Our specialist adviser summarised this view when he commented “There are substantial dangers that recourse to private finance will be used as a means of undertaking hidden public borrowing and expenditure. ... Without a significant transfer of risk to the private sector, schemes for private finance look like an attempt to circumvent budgetary controls on public expenditure, whether by creative accounting around definitions or by retiming the scoring of expenditure.“** A further concern is that there is no central control over the commitments being entered into by a diversity of organisations. In evidence during our inquiry into the 1995 Budget, the Treasury commented “this [PFI] is a decentralised initiative, for example, health authorities round the country are entering into contracts, and I do not think we can produce information on individual schemes. That would be the responsibility of individual departments and authorities. ”*? 28. Part of the difficulty of monitoring the level of future commitments is that PFI contracts are negotiated by bodies removed from both the Treasury and, in some cases, the departments to which they are responsible. In evidence the Treasury told us “So far as the Private Finance Unit in the Treasury is concerned, it does not have a role. It is even more remote than, say, the NHS Executive from trusts in relation to the monitoring of obligations that are entered into or are anticipated as being entered into by trusts. ... it is very much the responsibility of departments and they are the ones that are informed as to the arrangements that they are entering into for monitoring those commitments, and some of these are as small as a few hundred thousand pounds.”*? Indeed, the Government’s proposals for resource accounting show the diffuse nature of purchasing organisations,*' and also makes clear that several types of organisation capable of entering into PFI contracts will not have their accounts consolidated with that of the parent department. Evidence from the Treasury made it clear that even where initiatives are in place to collect information about PFI projects these are, at present, of a voluntary nature. “Health have for ... roughly a year to 18 months now had a system established on a subcontracted basis to a consultancy to actually monitor commitments. ... the way in which that database works is that it is very much market-driven, in that trusts are encouraged to register, but I am not aware that they are actually required to or there is a means to require them.” This implies that information concerning PFI projects - if it is to be consolidated centrally by departments and globally by the Treasury - will need to be collected by some special process which is not yet in place. 29. The rather haphazard system of monitoring PFI commitments was further revealed in the course of our oral evidence. The Treasury told us that, with regard to systems of monitoring, “There are none in place to monitor forward commitments in a systematised way of any sort across government departments, whether it is my pension, a defence project or the PFI. The PFI has brought a focus on to this. We are responding to it and putting those in place.”*? The failure to establish monitoring systems for PFI commitments was explained rather lamely by the Treasury. “The simple answer to that is that we were concerned to put the effort initially into getting this initiative established and working.” Sir Christopher Bland expressed his concern at the risks posed to public expenditure control by this lack of control of PFI commitments.* He noted that “the Treasury do not centrally total those forward commitments for every government department, and it is the case that not all government departments themselves total those forward commitments. ... if you ask some 38 Appendix 17, p.53. 3° Op.cit., Q128. 4 9395. if Better Accounting for the T. ea: ’s Money. The Government’s Proposals: Resource Accounting and Budgeting in Government, July 1995, Cm 2929, Diagram 3. 2 QQ391-2 (Italics added). 3 9384. 4 Q390. 45 9107.