1.29 The Government abolished PFI credits in autumn 2010 to create a level playing field for all forms of public procurement and remove the budgetary incentive the credits regime presented. Since the abolition of PFI credits, departments wishing to support PFI projects have been required to prioritise funding from their own budgets. This change has meant that departments have had to consider the economic case of a PFI project and compare this on a like-for-like basis with other calls on their budget. The removal of PFI credits has helped to ensure procuring authorities select the delivery route which provides the best value for money. A description of PFI credits is provided in Box 1.E.
Box 1.E: What were PFI credits? Under the PFI credit regime, departments wishing to support a programme of local government PFI projects were given a provisional allocation of PFI credits at a Spending Review. PFI credits represented a notional capital sum and were intended to support the capital costs of a project. Departments awarded this funding to individual projects subject to approval from the Projects Review Group. The funding was then paid to the local authority through a series of grants; these were usually calculated on an annuity basis. These grant payments were top-sliced from Revenue Support Grant within the overall local government Resource Departmental Expenditure Limit allocation. This ring-fenced funding gave additional spending power to central departments wishing to deliver PFI projects through local authorities. The Government cancelled PFI credits at the Spending Review 2010 to remove this budgetary incentive to use PFI. |