Q11 Stephen Barclay: So what assessment were you making about refinancing on this deal?
Charles Lloyd: We were not assuming the possibility of any refinancing gains. Can I just make one point on that? We would never assume and we would never ask an authority to assume the possibility of refinancing gains. Our role, if you like, is to set out how authorities should go about doing their value for money assessments, rather than doing the individual value for money assessment on every deal that went through during this period of time.
Q12 Chair: But you approved every deal?
Charles Lloyd: We approve every deal when it goes into procurement. So we take deals through something called the Project Review Group, which approves that they should go into procurement, yes.
Q13 Chair: Sorry-post credit crunch, when the credit crunch started, if something had already been approved for procurement you didn't draw it back to look again for value for money?
Charles Lloyd: As the NAO report makes clear, we did not draw every deal back. We did not ask every project to come forward with a new assessment of whether it was-
Q14 Chair: You did not?
Charles Lloyd: We did not.
Q15 Chair: Did you ask any project to come forward for reassessment?
Charles Lloyd: We did.
Q16 Chair: Which ones?
Charles Lloyd: We ask any project where what is called the PFI credits they require go up by either 20% or £20 million-all of those come back for reassessment. We also did the exercise that the report describes, which was asking PUK to do an overall evaluation of whether the movement in margins was likely to have created a systemic problem for us.
Q17 Chair: 20% is a jolly high figure to start worrying as to whether you're getting the VFM, isn't it?
Charles Lloyd: It's quite a high figure. There are a number of things that we would be trying to balance here, including not requiring projects to come back on a time-after-time basis for relatively small changes, so I guess it is a matter of judgment as to whether 20% is the right figure.
Q18 Chair: 20% is small change?
Charles Lloyd: No, 20% is quite a material change; I think that is why we do want those to come back.
Q19 Chair: Who set that figure?
Charles Lloyd: The Treasury set that figure.
Q20 Stephen Barclay: What was the tipping point for you, percentage wise, at which you would have assessed it not being value for money?
Charles Lloyd: One tipping point for us would have been the 300-basis-point figure identified in the PUK report. On the basis of the sample they looked at, we were aware that, if margins went above 300 basis points across the market, there was likely to have been a systemic problem for us; that is, many deals might not on that basis have been value for money.