In a paper issued in March entitled "The choice of finance for capital investment" the NAO looked at public and private finance in capital investment. It noted that the current value of PFI contracts stands at £58 billion.
It reports that:
- Private finance can represent value for money if the additional cost of finance is offset by benefits of risk transfer to the private sector
- For most departments, servicing private finance deals is not a major budgetary commitment, but for a small number of organisations it is significant e.g. the Highways Agency – 50%
- Private finance provides budgetary and cash flow flexibility, but the short-term cash flow benefit has to be assessed against the long term commitment to repay capital and interest
Acknowledging that the government has introduced measures to support the private funding of public assets it advises that the implications for national accounts and departmental financial statements merit detailed review.