Page last updated at 12:49 GMT, Wednesday, 1 July 2009 13:49 UK

Treasury 'manipulating' PFI books

The Government is manipulating new accountancy rules to favour future Private Finance Initiative (PFI) schemes, the BBC has been told.

Building site
Most new hospitals are being funded through PFI

New international accounting standards which Britain is adopting this year mean that, for the first time, most existing PFI schemes will be put onto the balance sheets of government departments.

But new guidelines issued by the Treasury earlier this month are alleged to be a deliberate way of avoiding treating PFI projects in the same way in the future spending budgets of government departments.

Nobody at the Treasury was available for comment.

PFI critics have long claimed that because most PFI projects have so far been off the books of government departments, investment decisions have been skewed towards PFI as a way reduce the apparent size of government borrowing.

Distorted choices

David Heald, professor of Accountancy at the University of Aberdeen, told BBC File on 4, "In the past we've had evidence that the choice of actual hospital and school schemes has been distorted by the question of whether something should be on the balance sheet."

He added: "Indeed it was made clear to hospitals and local authorities that they wouldn't get approvals for PFI schemes if they didn't comply.

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"If these projects are good value for money that is fine but if they've been driven solely by accounting treatment there's sufficient evidence to worry if they are good value for money."

Professor Heald says the Treasury's new budgeting guidelines amount to "manipulation".

"The very clear motive for the budgeting treatment is not to show PFIs as being part of public spending....the only reason one can say why it is being done is to reduce the apparent size of public spending and the apparent size of public debt," he added.

Professor Heald told the BBC he believed the Treasury's decision to be a "mistake". As a result of the Treasury's new policy he warned: "We are going to get a new round of criticism about dishonest government accounting."



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