PracticePeople In PracticeTreasury under fire over PFI

Treasury under fire over PFI

The Treasury has come under renewed pressure over the private finance initiative after MPs warned that off-balance sheet reporting for PFI deals would clash with legislation to change government accounting procedures.

A report from the Commons Treasury committee said the Treasury is ambivalent in its accounting guidance for PFI and ‘appears to be hoping for an off-balance sheet outcome’.

The committee’s report will renew an the debate around accounting for PFI deals, that was thought settled when the Treasury took Accounting Standards Board advice last summer.

Treasury committee member Nigel Beard said legislation to change existing ‘cash accounting’ in government departments to commercial accruals type accounting would clash with allowing liabilities arising from PFI deals to be off-balance sheet.

‘It could conceivably happen. These are liabilities against the public purse and given we are reforming the accounts these projects ought to be properly included.’

However, the committee’s document does not explicitly say PFI liabilities should be on the balance. Committee member Sir Michael Spicer said the report ‘equivocal’ over the issue.

The Treasury is yet to comment on the report but a further debate is likely to continue over whether liabilities under PFI should be considered a finance lease or operating lease.

Finding a solution to that debate will come someway to providing an answer to the balance sheet debacle.

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