Magazine article Public Finance

MPs Want PFI Refinancing Profits to Be Shared with Public

Magazine article Public Finance

MPs Want PFI Refinancing Profits to Be Shared with Public

Article excerpt

Private Finance Initiative Investors who sell shares in their equity should be forced to split the profits of those share deals with the public purse, MPs have told the Treasury.

The demand came after last week's Pre-Budget Report revealed that over the next 25 years, the public sector will pay mort than £160bn in annual PFI payments for £46bn worth of private sector investment.

PFI Investors can make additional profits by refinancing their initial borrowing. MPs on the Commons Public Accounts Committee heard that in recent cases such as the Bromley Hospital and Norfolk and Norwich Hospital PFIs, investors had used refinancing to increase their rates of return from around 16% to as much as 71%.

Acting PAC chair Alan Williams called such gains 'astonishing' and queried them with John Kingham, managing director of the Treasury's Finance and Industry Directorate.

Kingham said: 'It's true some have made significant profits, but others have lost.' He added that, following pressure from the PAC and National Audit Office, voluntary and contractual clauses meant that up to 50% of the profit gained from PFI refinancing was now shared with the public purse. …

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