Efford, Don, 1996, “The Case for Accrual Recording in the IMF’s Government Finance Statistics System”, IMF Working Paper WP/96/73 (Washington: International Monetary Fund, July).
Heald, David, 1996, “The Private Finance Initiative: Value for Money and Public Expenditure Control” in House of Commons Treasury Committee, The Private Finance Initiative, Sixth Report (London: HMSO).
Institute for Fiscal Studies, 1995, Options for 1996: The Green Budget, Commentary No. 50 (London: Institute for Fiscal Studies).
Organization for Economic Cooperation and Development, 1993, “Accounting for What? The Value of Accrual Accounting to the Public Sector”, Occasional Paper on Public Management, Vol. 1, No. 16 (Paris: OECD).
Oxford Economic Research Associates Ltd., 1996, Infrastructure in the U.K.: Public Projects and Private Money (Oxford: OXERA Press).
H. M. Treasury, 1995, “Better Accounting for the Taxpayer’s Money: Resource Accounting and Budgeting in Government” (London: HMSO).
H. M. Treasury, 1996, “The Private Finance Initiative: The Government’s Response to the Sixth Report from the [Treasury] Committee in Session 1995–96” (London: HMSO, June).
H. M. Treasury and Private Finance Panel, 1995, Private Opportunity, Public Benefit: Progressing the Private Finance Initiative, (London: HM Treasury).
H. M. Treasury and Private Finance Panel, 1996, Private Finance Initiative: Guidelines for Smoothing the Procurement Process [April].
Prepared by David J. Ordoobadi.
In light of its implications for accountability for and control over spending decisions, this issue is explored in some detail in House of Commons Treasury Committee (1996).
See, for example, Heald in House of Commons Treasury Committee (1996) and Institute for Fiscal Studies (1995).
The House of Commons Treasury Committee (1996, p xiv) states, for example: “There is no obvious reason why the benefits of better design could not be obtained under traditional procurement.”
Confederation for British Industry (1996), Oxford Economic Research Associates Ltd. (1996) and private sector PFI participants in testimony to House of Commons Treasury Committee (1996) review obstacles to PFI implementation in some detail.
The 1992 Autumn Statement (H. M. Treasury (1992, p. 27)), for example, indicated that: “…privately financed spending will be additional to public provision. The spending which is financed by Government will come out of departmental spending allocations. This is consistent with the principle that the control total should cover the spending which the public sector undertakes, or which it controls.”
The limitation on the need to assess a PFI project against a public comparator is intended to ensure that, in contrast to the Ryrie rules, a purely hypothetical public sector alternative with no chance of implementation does not derail the PFI investment.
While it is true that cost overruns will be borne by the private supplier in the case of PFI projects, this transfer of risk and the changed incentives that it engenders make it unlikely that PFI bids will systematically underestimate project costs, suggesting that the capital savings on PFI projects should be considerably less than past cost overruns in traditionally procured investments.
H.M. Treasury (1996) indicates that this monitoring will provide data on both private sector capital spending under the PFI and associated public sector forward commitments, with the view to ensuring that the latter is consistent with sound budgeting overall and, on the departmental level, does not compromise a department’s ability to undertake other priority spending, including capital spending not suited for the PFI.
The distinction between financing and operating leases hinges on which party—lessor or lessee—effectively bears the risk and reward of ownership of the leased asset. The terms of a financing (operating) lease place effective ownership with lessee (lessor).
Fully expending an asset likely to be productive over a number of years is a major shortcoming of cash accounting. A switch to accrual accounting would address this deficiency and result in a more level playing field between PFI projects and the traditional approach to procurement.