Crunch Time for PFI
The National Audit Office recently issued its report on the implications of the credit crisis for both existing and future PFI projects. “Financing PFI Projects in the credit crisis and the Treasury’s response” highlights the challenges the Treasury faced as the crisis took hold in the autumn of 2008, explains the Treasury’s response and outlines the Treasury’s proposals for the financing of future projects.
The report examines the Treasury’s policy of endeavouring to close PFI deals promptly to stimulate the economy, a policy based on the premise that delays in finalising PFI contracts would result in the loss of the opportunity to boost growth through new infrastructure. It also considers the effect of higher interest costs on PFI deals as a result of the credit crisis, casting the Treasury’s response in a favourable light despite the fact these increased costs inevitably affected the value for money previously attributed to PFI.
Whilst the report points to a more cautious approach by the Government to PFI deals in the future, the door certainly hasn’t been closed on PFI and confidence remains high that this route can, in the right circumstances, offer value for money. That said, given that the economic climate remains a challenging one it seems that alternative financing options will increasingly be explored for future infrastructure projects.
In an article available on this website, the terms of the report and possible lessons for the future are considered in more depth. Please click here for the article.