Darling catches himself off-balance

Gavin Hinks, AccountancyAge

His government, after all, has presided over the biggest off-balance sheet
scheme of the lot ­ PFI.

The importance of the private finance initiative has never had the profile it
deserves ­ not least at the Treasury, it seems.

Ever since this government came to power, and as part of a scheme pioneered
by the Conservatives, hospitals, roads, and all manner of public sector assets
have been funded in ‘off-balance sheet’ structures.

Local authorities have gained access to huge funding streams by structuring
contracts to ensure that the risk apparently lies elsewhere.

Few know the true cost to the taxpayer of the schemes, so opaque is the
accounting. It runs almost certainly to the tens of billions. PFI does not have
a high-profile because it is so complicated few understand it ­ much like
sub-prime loan related derivatives.

High-profile failures such as Metronet appear set to land taxpayers with huge
bills and have enriched advisers, many of them accountants.

Opinions may differ about whether any of this is a good thing. But Darling’s
comments do raise some questions. Does he know that his government runs huge
risks that are not on the books? If so, perhaps this was just another example of
a politician underestimating the electorate. Depressing, but not surprising.

If he doesn’t know, that would be more worrying.

Gordon Brown was sometimes termed the ‘Enron chancellor’ because of his
preference for off-balance sheet structures. But at least he seemed to know that
they existed.

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