B7 The use of two terms - 'PPP' and 'PFI' - to refer to Government relationships with the private sector can cause confusion, with the terms often used interchangeably. However, there is an important purpose in having two terms: to make it possible to differentiate between two different types of transaction. Specifically, to differentiate between PFI as a procurement tool, and PPP as an ownership structure.
B8 This distinction is especially important in financial reporting. The vast majority of PFI contracts represent a liability for a stream of payments that stretches over the long term, and which the Government will have to meet from revenue expenditure in the year in which they are liable. In a PPP deal by contrast, the Government owns an equity stake in a company, an asset, and this is therefore different in kind from a PFI transaction.
B9 It is important to highlight this distinction when considering aspects of the public finances, and the Government intends to ensure the transparency of information presented in the future by isolating and identifying, where appropriate, data on PFI projects and PPP transactions. Consequently, the data presented in the report focuses on PFI investment and the liabilities associated with it, and excludes PPP transactions and other kinds of Government relationship with the private sector.
B10 The data presented in the report therefore includes the early forerunners of PFI, such as the Queen Elizabeth II bridge which commenced before the formal launch of the Private Finance Initiative on 12 November 1992, because these early projects are functionally similar to PFI in that they too involve long-term payments to the private sector in return for provision of a public service asset.
B11 Investment in other kinds of Public Private Partnerships, such as the National Air Traffic Control PPP and the Home Office Airwave PPP are not included.