2.54 The Treasury issued guidance to departments on refinancing issues in 2002 in connection with both the launch of the new refinancing code and revised standard PFI contract terms. In the light of the issues raised by our analysis of the Dartford & Gravesham hospital refinancing, and the Treasury Refinancing Taskforce's monitoring of all refinancing negotiations on which it has been consulted, the Treasury, through its Refinancing Taskforce, has taken steps to emphasise to departments the key features of the Treasury's refinancing guidance. The Taskforce is underlining the need for appropriate advice and rigorous value for money analysis before departments agree to refinancings, particularly where they involve the private sector increasing its levels of debt. The main points the Taskforce is bringing to departments' attention are set out in Figure 19.
19 | The main aspects of its refinancing guidance which the Treasury Refinancing Taskforce is bringing to the attention of departments |
■ The importance of a rigorous value for money analysis to support the case for departments agreeing to a refinancing proposal. | |
■ As part of this analysis, expert advice should be sought on the implications of any proposal which includes an intention to increase the amount of private sector debt, particularly where the proposal includes contract amendments such as an extension to the length of the contract. | |
■ Increased termination liabilities should not be accepted without fully evaluating the benefits and disbenefits of alternative refinancing terms involving no increase to termination liabilities. | |
■ Project teams should draw on experienced advice from their departmental Private Finance Units and external advisers. | |
■ The Treasury Refinancing Taskforce should be kept informed about the refinancing negotiations. The Taskforce should be consulted on issues regarding the interpretation and implementation of the refinancing code and related Treasury guidance. | |