Memorandum by the Office for National
Statistics
INTRODUCTION
This memorandum sets out the way ONS handles
Private Finance Initiative (PFI) projects in respect of the National
Accounts and public finance statistics. It relates primarily to
the issues raised in Question 6 of the inquiry:
— "How should future payments by the
Government under existing Private Finance contracts be recorded
in public sector accounts?
— Is risk transfer an appropriate test?
Should all such liabilities be included in the national debt?
Should they be accounted for separately from government debt?
How much does the public sector accounting treatment of capital
and revenue aspects of projects matter?"
2. ONS TREATMENT
OF PFI PAYMENTS,
ASSETS AND
LIABILITIES IN
NATIONAL STATISTICS
The UK National Accounts are produced according
to international statistical guidance laid out in the European
System of Accounts (ESA95) which itself is based on the international
System of National Accounts (SNA93). ESA95 is supplemented
by further guidance on the treatment of PFI contracts within Eurostat's
Manual on Government Deficit and Debt (MGDD). The public finances
statistics include Public Sector Net Debt (PSND), and are constructed
consistently with the National Accounts.
The international statistical guidance and the
accounting guidance on PFI contracts followed to date by departments
and public bodies are broadly similar. This has enabled ONS to
make use of the independently-audited accounts of public bodies,
and of relevant private corporations, in the compilation of the
National Accounts and public finance statistics: The MGDD confirms
that the ONS approach of making use of public sector accounting
data for PFI reporting purposes is generally in line with its
guidance, stating that "There are rules based on Generally
Accepted Accounting Practice (GAAP) and on other International
Standards, applied by private business to some of these arrangements.
These seem to be quite consistent with the substance of ESA95 and,
apart from borderline cases, they are likely to give similar results
as regards the classification of assets".
In 2006, public sector finance lease liabilities
relating to PFI contracts were first included in PSND. This increased
the total by around £5 billion. One development that
has required attention is the adoption of International Financial
Reporting Standard (IFRS) in the accounts of public bodies from
1 April 2009. This requires accounting practice that is both
different to previous UK GAAP and to the required National Accounts
treatment. In September 2009, following consultation with ONS,
the Treasury provided technical guidance to departments requiring
them, from 1 April 2009, to report on both an IFRS and an
MGDD basis for PFI contracts where the public sector's recording
of PFIs under each of these accounting bases would differ. This
should give ONS the appropriate data sources to record PFI payments,
assets and liabilities in government current and capital expenditure,
and in balance sheets. ONS will keep the adequacy of this approach
under review.
ONS has recently published an article "Government
financial liabilities beyond public sector net debt" (see
3.iii below) which includes a number of recommendations, including
proposals for production of an expanded explanation of public
sector liabilities. As part of this work, ONS will further address
the issue of PFIs in statistical publications.
3. PUBLISHED
ARTICLES
The issue of Private Finance Initiative (PFI)
schemes, as they affect published official statistics, has been
the subject of a number of ONS published articles. Recent articles
can be found at the following locations:
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