3.16  An off-balance sheet local government project has no impact on a Department's budgets, but will normally be funded by PFI credits. From the Local Authority's point of view, PFI credit allocations are sources of additional funding from central Government.

3.17  An on-balance sheet local government project cannot use PFI credits as a source of funding. Instead, it scores against the sponsor department's Capital DEL. This may be in the form of a grant, or a promise of a stream of funding similar to PFI credits.

3.18  Self-financed local government projects do not require any central government budget, but do not get any central government support.

3.19  Allocating each Department a set amount of PFI credits each year provides an incentive for the Department to pursue off-balance sheet projects. PFI credits are used by Departments as if they were another capital budget in addition to Capital DEL, solely for off-balance sheet projects. The Budgeting rules mean that Departments cannot switch amounts between PFI credits and Capital DEL. So if a Department intends to fund a project through PFI credits and later finds that the project will be either procured using conventional funding or is on-balance sheet, it will have to find sufficient Capital DEL and can not use the PFI credits for the project.