Magazine article Public Finance

Brown's Investment Rule at Risk as PFI Debts Go on the Books

Magazine article Public Finance

Brown's Investment Rule at Risk as PFI Debts Go on the Books

Article excerpt

The Office of National Statistics has recalculated public sector net debt to include Private Finance Initiative deals in a move that threatens the chancellor s sustainable investment rule.

The recalculation involves 'imputing' the current debt element of completed PFI deals into PSND for the first time, adding £5.95bn to it. Along with other updated calculations, the PFI debt brings PSND to £474.2bn,or36.7%of gross domestic product, up from 35.3% last year.

Gordon Brown's rule means he must keep PSND below 40% of GDP over the economic cycle. Christine Frayne, senior research economist at the Institute for Fiscal Studies, told PF the change put that in doubt.

'The Treasury s projections for 2009/10 show they are expecting PSND to reach 38.4%. That does not include these new ONS calculations and it is possible that, as more PFI schemes come into operation, the increase they bring to PSND will be even greater,' she said.

The current recalculations involve only half of existing PFI deals, with a full capital value of £23bn. …

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