Annex (continued)
13. Because of the higher efficiency savings
achievable under a PPP, the private sector should need to raise
less finance than under a public bond issue. The incremental cost
of the finance under a PPP can be estimated as the difference
between the cost of servicing a public sector bond—about
£3.5 billion as shown in Table 5—and the private sector
servicing cost of about £2 billion (shown in Table 8).
SUMMARY
14. The overall difference between the private
and publicly financed options is expected to be about £4.5
billion in real terms, comprised as follows:
| £ billion |
Public bond | PPP
| Difference |
| Infrastructure costs | 15.5
| 12.5 | 3.0
|
| Cost of finance | 3.5
| 2.0 | 1.5
|
| Total | 19.0
| 14.5 | 4.5
|
15. Ultimately the cost of the PPP will depend on the
bids received and the contract terms entered into. It is therefore
planned that the proposals from the private sector will be compared
with a rigorous Public Sector Comparator.
PricewaterhouseCoopers
6 December 1999
| 
