National Audit Office: having to tell civil servants to renegotiate

Departments Losing Out in Finance Initiative

Government departments are failing to secure good deals with companies involved in Private Finance Initiative projects - which combine public and private money.

The guardian of public spending, the National Audit Office (NAO), says the firms involved are not always shouldering their fair share of the financial risks. In its annual report, the NAO says it has had to advise a number of departments to renegotiate deals to secure a better spread of risk.

The Private Finance Initiative (PFI) was introduced by the previous Conservative government to cut the cost of borrowing by involving private sector firms more directly in the building and running of public service projects.

It has since been taken up by a Labour administration keen to promote public-private partnerships.

But the NAO says that, having looked at more than 30 preliminary PFI proposals, it is concerned at the distribution of the assets between the public and private sectors.

If the assets were accounted for on the public sector balance sheet it could indicate not enough risk was being transferred to the private sector to justify the cost to the taxpayer.

The NAO calls for guaranteed access to the records of contractors so it can audit payments made under PFI contracts. Currently it has to negotiate access to the books individually for each contract with the commissioning department.

The report adds that the NAO is anxious to ensure the notes to the accounts of the departments involved give full disclosure of the length and nature of any long-term public sector commitments arising from PFI projects.