PFI the Holy Grail?

Abstract

This paper examines the development of the Private Finance Initiative (PFI) over the last seven years in relation to the UK Government’s ideological and policy objectives. It reviews the use of value for money (VFM) as one of the main criteria for approval of PFI projects, highlighting the gradual removal of the definitive yardstick of a public sector comparator which allows the wider possibility of subjective and judgmental criteria in the determination of VFM and approval of PFI projects. A consideration of the recent conflict between HM Treasury and the Accounting Standards Board (ASB) is also discussed. This relates to the interpretation of FRS 5 with regard to its implementation to UK central Government Departments’ final accounts and the subsequent effect of this on the UK Public Sector Borrowing Requirement (PSBR). This suggests that the need to manage the control total is the main driver of Government policy towards the PFI rather than the stated aims of VFM and transfer of risk.