12 October 2007
The Treasury has indicated that hopes for transparency around the UK's Private Finance Initiative debt might be premature.
In last April's Budget, then chancellor Gordon Brown pledged that from 2008/09 government departments and other public sector bodies would adhere to International Financial Reporting Standards.
That led to expectations that £29bn of PFI assets currently 'off balance sheet' would be moved on, as IFRS rules differ from current UK practice.
But Public Finance has learnt that Treasury officials told its independent Financial Reporting Advisory Board on October 8 that they had discovered a substantial problem in adopting IFRS rules.
They said the rules clashed with the way the Office for National Statistics and the European Union account for national debt on the balance sheet treatment of PFI deals.
Only 'on balance sheet' deals count in calculations of public sector net debt.
As other countries would continue to keep a large amount of debt 'off balance sheet', the UK would be disadvantaged.
The Treasury's move has frustrated the FRAB, which saw the adoption of IFRS as an opportunity to end the 'inconsistencies' in the accounting treatment of PFI projects, under which less than half of the £53bn capital value of signed projects are recognised in public sector balance sheets.
Senior accountancy sources are divided over whether this problem is material or not, with some claiming that the ONS and EU will eventually adopt IFRS themselves.
PFoct2007
