The private sector cannot borrow as cheaply as can the Government, and Treasury publications on PFI matters adduce that fact as a potential drawback to the use of private finance. Yet the Treasury surprisingly suggested that no additional net costs in PFI deals might result, provided differences in risk between PFI and conventional projects were taken into account. Funding competitions clearly help to ensure that the external financing costs are minimised but it cannot simply be assumed that the resulting costs of private finance will be no more than that of public finance after allowing for risk. If PFI deals are to be justified on the basis that the benefits of private finance outweigh the costs, then we would expect the Treasury to have a clear idea of what the extra costs of private finance are.
5. Our detailed conclusions and recommendations are: