HISTORIC PRESS RELEASE : Treasury publishes Public Sector Comparators Guidance on Private Finance Initiative (PFI) Deals [October 1999]

The press release issued by HM Treasury on 29 October 1999.

The Treasury today published guidance on how to assess the long term cost of Private Finance Initiative bids against the estimated cost of alternative services managed by the public sector.

The guidance sets out how the long term cost of PFI bids should be compared with the estimated cost of alternative services managed by the public sector and assuming the use of public sector capital investment.

Welcoming publication of Technical Note 5 “How to construct a Public Sector Comparator” Andrew Smith, Chief Secretary to the Treasury said:

“The new guidance will provide consistency and clarity for everyone involved in the development of schemes to improve front line public services.

“The Government’s purpose in using the PFI route is to improve public services in ways that offer value for money. Where PFI is unlikely to achieve these aims, services will be provided by direct capital investment. The new guidance will ensure greater rigour and consistency in decisions about whether to use PFI.

“Public sector comparators alone are not the basis for assessing value for money. The National Audit Office has always made it clear that PFI deals require a systematic evaluation of all the likely benefits and costs and I recognise their reports on early PFI transactions have helped to clarify the issues on which such guidance was needed.”

Mr Smith said that there were many benefits arising from the use of PFI deals and gave a number of examples. In a hospital, this could include the considerably faster delivery of modern facilities, on a single site, allowing NHS management to focus on the quality clinical services. Similarly in schools, parents would favour the benefits of teachers concentrating on raising educational standards without the distractions of inadequately maintained buildings and the disruption of winter boiler failures.

The new guidance reflects the intensive consultation with departments PFI contractors and the National Audit Office, whose reports on early PFI transaction helped clarify the issues on which such guidance was needed.