APPENDIX 3: CALL FOR EVIDENCE |
Private Finance Projects and off-balance sheet debt
Private Finance arrangements, whereby private firms
contract with the Government to build and maintain infrastructure
and other capital projects, are a controversial but significant
means of funding public sector infrastructure projects. Most such
arrangements are known as Private Finance Initiative (PFI) projects.
The Economic Affairs Committee has decided to conduct
an inquiry on 'Private Finance Projects and off-balance sheet
debt'. Evidence is invited by 25 September. The Committee will
welcome written submissions on any or all of the issues set out
The inquiry will seek to answer questions such as:
How should the cost and benefits of Private Finance
projects be assessed? What discount rate should be used in comparing
Private Finance with conventional public procurement? Are current
procurement procedures satisfactory? Is enough information disclosed
on Private Finance projects fully to assess whether the taxpayer
is getting value-for-money?
How does the performance (e.g., cost, delivery dates
and service quality) of schools, hospitals, prisons, roads and
other projects operated under private finance compare to those
which were traditionally procured?
Is there significant risk transfer to the private
sector or is it more apparent than real?
How effective and costly has it been to monitor the
private sector providers' performance and quality of service in
Private Finance projects in comparison with traditional procurement?
When the basis of a Private Finance contract needs
to be altered post procurement because of changing client needsfor
example, a bigger jail is required due to a larger than expected
prison populationhas this proved problematic compared to
projects under traditional procurement? What has been the experience
of PFI projects that have reverted to the public sector?
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
Would public sector investment in the last decade
have been lower without Private Finance? If so, by how much?
How much impact has the financial crisis had on launching
new Private Finance projects? Is the crisis likely to have a permanent
effect on the Private Finance market?
Are there realistic alternative roles for private
finance than the current PFI-type private finance models? Should
the UK be aiming for more diversity in private finance models?
Would a national infrastructure bank (such as the proposed Dodd-Hagel
NIB in the US) add any value in the UK? Should the public sector
have a more hands-on role in financing and/or delivery?
Is there an optimal mix between conventional public
procurement and Private Finance for public sector investment?
What is the long run role of private finance in the delivery of
infrastructure both in the UK and globally?