Private Finance Projects and off-balance sheet debt - Economic Affairs Committee Contents

Supplementary memorandum by the Office for National Statistics

  1.  At the hearing on 20 October 2009, the Chairman asked ONS to provide a supplementary note setting out the relevant figures relating to the balance sheet treatment of PFI contracts. (Q137 and Q146 refer)

  2.  The notes below set out the relationship between the total capital value of private finance schemes and the related finance lease liabilities included within Public Sector Net Debt (PSND).

    (a) HM Treasury's PFI statistics [1] indicate that, at April 2009, the total capital value of all signed schemes was around £64 billion, including London Underground public-private partnerships (PPPs). Of these, the value of those currently operational or under construction is about £51 billion.

    (b) About £25 billion of this total are designated as on-balance sheet schemes, for the purposes of the accounts of the public sector bodies concerned.

    (c) As set out in an article in September 2007 [2], the companies involved in the London Underground PPP schemes are now classified by ONS as within the public sector. Accordingly, the finance lease liabilities and assets relating to these PPPs consolidate out within the public sector. The London Underground schemes have a total capital value of around £18 billion. Consequently, adjusting the total capital value of on-balance sheet schemes to reflect this consolidation effect, leaves a capital value of around £7 billion.

    (d) This compares with estimated public sector finance lease liabilities of about £5 billion at end-March 2009. Under the international conventions to which ONS works, these are included in PSND.

  3.  The remaining difference between the £7 billion capital value of schemes and the £5 billion public sector finance lease liabilities is caused by a number of factors, explained in a 2006 article [3]. These factors include:

    — Finance lease debt and capital value are not the same thing. The capital value of assets for signed projects includes forecasts of future asset values, where the work may be incomplete or not yet started. These liabilities are contingent therefore on the construction or improvement being completed satisfactorily. Consistent with the international conventions, contingent liabilities are not included in PSND.

    — Timing of recording—where the accountants and auditors judge the asset should be on the public sector balance sheet, the transfer of economic ownership, and so the recognition of the liability, will usually occur only when all of the construction is completed and the asset becomes operational.

    — The finance lease liabilities initially recorded will reduce over time as repayments are made.

  4.  To give some context for these figures, Public Sector Net Debt is now some £825 billion [4]. ONS has estimated that the overall effect of the financial crisis interventions will be to add a further £1.0 to £1.5 trillion to this total [5]. Work is underway to yield more precise estimates.

Office for National Statistics

November 2009


[1]  Available on the HM Treasury website at

[2]  ONS article, Classification of Metronet, Tube Lines and the London Underground PPP, September 2007, by Martin Kellaway and Helen Shanks

[3]  Economic Trends, November 2006, "Including finance lease liabilities in public sector net debt: PFI and other", by Adrian Chesson and Fenella Maitland-Smith

[4]  Public Sector Finances Statistical Bulletin—September 2009

[5]  ONS article, "Public Sector Interventions in the Financial Crisis: Statistical classification decisions", by Martin Kellaway, November 2009

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