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How to Have Your Cake and Eat It

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  • James Cuthbert
  • Margaret Cuthbert
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    Abstract

    This article is about how the capital assets in private finance initiative (PFI) schemes are treated in government accounts. The article begins by describing how public sector obligations in relation to the capital assets of PFI schemes are accounted for in the national accounts, and also, using different accounting standards, in departmental accounts. The article then considers the implications of information obtained using Freedom of Information on the way a sample of PFI schemes actually behave in practice. Analysis of this data suggests that the methods used in the national accounts, and in departmental accounts, seriously underestimate the true scale of PFI obligations. The data also indicates potential weaknesses with the risk-based test for assessing whether a PFI asset should come onto the public sector’s books in the national accounts – with the implication that many more PFI schemes should be brought on-book in the national accounts.

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    Bibliographic Info

    Article provided by World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE in its journal World Economics Journal.

    Volume (Year): 13 (2012)
    Issue (Month): 1 (January)
    Pages: 53-64

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    Handle: RePEc:wej:wldecn:506

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