2.4 The public sector can take its share of the refinancing gain as either:
■ a lump sum; or
■ over time in the form of a reduced annual unitary charge; or
■ by receiving services to the value of the authority's share of the refinancing gains.
2.5 Most public sector departments have chosen to take the gain as a lump sum with the exception of the Department of Health which has advised NHS Trusts to take their refinancing gains over time. There are possible advantages and disadvantages of either taking the refinancing gains as a lump sum or over time (Appendix 8). But, if the gains are not taken as a lump sum, an authority could be exposed to uncertainty over recovering the outstanding balance of the gains it is due if the contract is ended early. Whether this becomes an issue will depend, amongst other things, on the contractual arrangements for early termination (which differ between current contracts and early PFI contracts) and the reasons for terminating the contract (which can effect the terms of the termination). The Department of Health accepted, when examined on this point by the PAC, that an authority had less protection if a PFI contractor failed and the authority had not taken the gains as a lump sum. The Department pointed out, however, that by taking the gain as a lump sum, the need to fund this amount would add to the contractor's debt which could increase the authority's termination liabilities. The Treasury emphasises the flexibility of current arrangements whereby authorities are able to select the option for receiving their share of the refinancing gains that best suits their circumstances. It also notes that, in current contracts, if the contract is terminated due to contractor default, the authority will normally pay its termination liabilities over time by continuing to pay an annual charge which will have been reduced to take account of the authority's share of the refinancing gains.