The new fiscal framework and the introduction of resource accounting will bring important benefits to public sector managers.
And it will allow them to choose wisely between PFI/PPP projects and public procurement, according to a report by public sector accountancy institute CIPFA.
The body says this will allow public sector managers to enter into advantageous PFI/PPP initiatives in the future, based on their ‘value for money’ rather than as a mechanism to improve the appearance of their balance sheets.
PFI/PPP stewardship issues maintains the new fiscal framework incorporates the golden rule: ‘Only borrow to invest’, and the wider use of resource accounting allowing managers to easily select the best capital investment options.
Stever Freer, CIPFA chief executive said: ‘New fiscal rules adopted by the chancellor and the wider application of resource accounting will help public bodies make the best use of PFI and PPP schemes.’
However the report said this would only be the case if the control framework for capital investment were changed in line with the government’s financial strategy.
Tony Redmond, chairman of CIPFA’s Treasury Manamgement Panel said public funding was, in most cases, cheaper than private sector investment.
Therefore, he said, ‘any PPP scheme must, therefore, demonstrate value for money through construction and management of the scheme and its service delivery.’
The report also examined the role of finance directors in PFI/PPP schemes and highlighted the key issues they needed to consider before entering into agreements with the private sector. Amongst the things FDs should consider include the scope of the scheme, its affordability, the risk involved and the range of other options available.
In addition, the report contained advice for organisations considering entering into PFI/PPP projects.
Recently PFI has become the main method of providing capital to build public amenities. Many hospitals and schools have been built using the procurement strategy though it has proved controversial.