Darling fudges PFI rules to hide assets
The government is set to fudge new rules on private finance initiative accounting, keeping assets off balance sheet to prevent expensive capital charges
The move, which comes amid an argument over Northern Rock’s liabilities
appearing on the government’s books, is likely to provoke another political row
about the projects, especially as Alistair Darling himself has been so critical
of private sector off-balance sheet structures.
Government departments are resisting moves to switch to international
accounting standards over fears of capital charges, a source familiar with
government accounting said. ‘Government departments would incur a capital charge
of 3.5% for bringing debt on to the balance sheet… which explains why
departments would have a vested interest in keeping stuff off the balance sheet,
unless the Treasury changes that rule.
They’re going to wriggle and squirm so as to not play by the same rules as
those in the private sector.’
On 1 April, all government departments must make the change to IFRS. The
Department of Health and the Ministry of Defence have admitted they will miss
the deadline.