In the Committee's hearing on 18 November 2002, the National Audit Office was asked by Mr Ian Davidson MP to clarify whether in considering the NavCanada not-for-profit model, the UK government were using the same criteria to judge what would be classified to the public sector in the UK national accounts as in, a) Canada and b) equivalent European countries.
The Office for National Statistics is the government agency responsible for compiling, analysing and disseminating many of the United Kingdom's statistics, including national accounts and the classification to the public sector. The Office for National Statistics produces the UK National Accounts in accordance with international standards defined in international statistical accounting manuals: the European System of Accounts 1995 (ESA95) and the System of National Accounts 1993 (SNA93). The former guidance is implemented in Europe and the latter standard, promulgated by the Organisation for Economic Co-operation and Development, and the United Nations, has also been implemented in Canada. So common rules therefore apply in the United Kingdom, Europe and Canada.
The classification rules state that an institution is classified according to who exercises control over ability to determine general corporate policy. In the case of NavCanada, this organisation is classified to Canada's private sector. As shown in Appendix 3 of the National Audit Ofice Report, the Canadian government directly nominates only three of the 15 directors on NavCanada's Board. It therefore appears that a structure on the NavCanada model could result in classification to the private sector in the UK national accounts, though this would be subject to detailed assessment of all corporate control mechanisms by the Office.
The Department did not obtain formal advice from the Office for National Statistics on the likely treatment of a possible option on the NavCanada model, which had not been worked up in such detail as the proposals for a PPP. However, discussions with the Treasury in 1997 had suggested that a not-for-profit model similar to NavCanada might be capable of being structured to achieve private sector classification in the UK national accounts. The Department did obtain formal advice, via the Treasury, from the Office for National Statistics, on the likely treatment of the NATS PPP in national accounts.
As shown in our Report, the Department chose the PPP model over the not-for-profit corporation because they considered it would provide better efficiency incentives, better access to private sector management and better incentives for NATS to do business overseas.
February 2003