Business PFI Switch to Turn Up the Tax-Rise Pressure

The Evening Standard (London, England), May 20, 2005 | Go to article overview

Business PFI Switch to Turn Up the Tax-Rise Pressure


Byline: JANE PADGHAM

PRESSURE on Gordon Brown to raise taxes will increase when billions of pounds of investment undertaken through the Private Finance Initiative is included in the official measure of public sector debt, City experts said today.

In a move that will highlight the sharp deterioration in public finances in recent years, the Office for National Statistics confirmed that part of the cost of PFI deals will be shifted into the Government's calculation of net debt.

This relates to the value of finance lease loans, rather than the capital value of the projects as reports have suggested. The ONS said the amount of money involved was not yet known, but accountants estimate it will be about [pounds sterling]12 billion. It added that any move would not come until later this year or early next.

Jonathan Loynes, an economist at Capital Economics, said: "The upshot is that, while these changes do not transform the fiscal position, they add to already growing pressure for a period of fiscal consolidation over the next few years, probably incorporating both slower growth in public spending and tax increases, to get the public finances back on to a more sustainable footing."

The value of PFI deals already signed is [pounds sterling]43 billion, with another [pounds sterling]12 billion or so in the pipeline in the next couple of years. Some of these liabilities are currently excluded from the Government's calculation of public sector net debt - the total amount outstanding from current and capital spending.

Reclassifying these would push net debt closer to the 40% limit specified by the Chancellor's Sustainable Investment Rule.

It is already creeping higher, rising from 32. …

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Business PFI Switch to Turn Up the Tax-Rise Pressure
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