Government praised over PFI refinancing

The government's drive to share in PFI windfalls has been praised by the Public Accounts Committee today (Friday).

In its latest report, the committee commended the efforts of the Office of Government Commerce in negotiating a voluntary code with the private sector.

Under the code, when a PFI contract is refinanced the government will take 30% of any gains - even where there was no provision for it under the original contract.

The estimated return to the taxpayer will be between £175m and £200m.

Refinancing is a technique that allows for improved financing terms on projects where risks have been successfully managed.

In the past companies involved in such deals have often reaped benefits running into millions of pounds, claimed the report.

The committee also concluded that in respect of past deals which had not provided for refinancing gains to be shared, individual departments would have faced an uphill task in arguing to share them.

However the report cautioned that while the new guidance on sharing refinancing gains is welcome, the arrangements can only work effectively if departments equip themselves to pursue refinancing gains.

To date, departments have not been good at recognising refinancings and understanding their complexities, said the committee.

Recommendations for improvement include Whitehall staff, involved in managing PFI contracts, to receive specific training to deal with PFI refinancing issues.