Q141 Mr Bacon: It was in the case of the tanker. Sir Bill leffrey described it as "the conditions we were operating under at the time", which is the best euphemism I have heard for the former Prime Minister.
Andy Rose: My understanding is that that decision was made a very long time ago. I don't think in current Treasury methodology there is anything that says there should be a presumption that it should be PFI.
Chair: I don't think it was that long ago.
Q142 Stephen Barclay: But you weren't re-assessing these, so you were basing it on an earlier presumption. You were saying, because of the urgency of the market, we are not calling these back in for reassessment.
Andy Rose: That's the PRG, which is around local authority transactions, where it is. On FSTA, it is my understanding that that decision to go down that route was a long time ago and I believe that was not reassessed.
Q143 Stephen Barclay: Well, the project team advised against it in 2004 on the Air Tanker.
Q144 Ian Swales: There are different policies adopted for different things. We also heard that various things are under review at the moment. Do you regard this review as being total, or are there some sacred cows in terms of policies and things where we won't be looking under the stones?
Andy Rose: I think the reality is there's been quite a lot of change over the last six months, from the General Election to the Spending Review to the National Infrastructure Plan. There's also a cost review ongoing. I think it's quite a good time to review quite a number of things. I think there will be an update to the market about some of the mechanics, about how PFI works; there will be an update on the value for money guidance. I think it is quite a broad review; I wouldn't necessarily say that it encompasses everything, but I think the reviews at this time will be quite broad.
Q145 Chair: This takes us into the future, really, because we had the infrastructure report yesterday. There is going to be a steady decline in capital infrastructure over the Spending Review period by, I think, nearly 30% when we get to 2014-2015.
However, am I right in thinking that the imperative will be to keep as much of that as possible off balance sheet? Can you answer that first?
Andrew Hudson: Whether something is on or off balance sheet is a technical categorisation issue. The aim is to use that capital spending and it's explained which Departments it's going to, in the best possible way to fund the key projects.
Q146 Chair: No, it isn't technical, because you will not be able to afford to get it on balance sheet if we're to get the cuts in public spending that the Government seek to achieve.
Andrew Hudson: Well, the amount-
Q147 Chair: It may be technical in the sense that you want it to stimulate other activity in the private sector. I get that. On the other hand, given the constraints on public finance, you won't be able to do that through techniques that are traditional, on-balance sheet capital investments. Can you?
Andy Rose: I think it's important to recognise that many of the markets covered by the National Infrastructure Plan are more in the areas of economic infrastructure, where the money is raised by the private sector, such as the large utility companies in the energy market. The PFI is not part of-
Q148 Chair: But the £40 billion, if you stick to the £40 billion that will be our per annum capital investment from Government by 2014-2015, where's that going to come from? On balance sheet? Off balance sheet?
Andrew Hudson: The public sector capital is on balance sheet.
Q149 Chair: That will all be on balance sheet?
Andrew Hudson: Yes.
Q150 Chair: So there won't be a PFI element to that at all?
Andrew Hudson: Some PFI is on balance sheet. I think 24% of transactions have been on balance sheet; the rest, three-quarters or so, has been off balance sheet. The key thing in judging whether a PFI project goes ahead, now as before, is whether it's good value for money, because it has to be paid for, and in the case of PFI it's paid for from a Department or local authority's resource budget, rather than from its capital budget, so that all needs to be paid for out of scarce resources. That will only go ahead, on or off balance sheet, if the Department judges that it's value for money.