A Commons' spending watchdog has warned government plans to use local government pension schemes as a ‘back door' way of funding infrastructure projects risk continued private finance failure.
Publishing the Government's response to its report into private finance initiative (PFI) funding today, the Treasury Select Committee says the National Infrastructure Plan - issued alongside the Autumn Statement – supporting 500 projects and programmes worth £250bn, involves further risks in the form of additional government liabilities and guarantees.
According to the plan, the Government is pledged to giving local authorities more flexibility to support major infrastructure, to guarantee schemes when investors cannot bear risks and explore new sources of revenue to support investment.
To this end a memorandum of understanding has been signed with the National Association of Pension Funds, which represents nearly three quarters of the funds comprising the Local Government Pension Scheme (LGPS), and the Pension Protection Fund.
But the Committee has vowed to carefully monitor the development of these plans to ensure full transparency, warning: ‘the creation by the back door of new forms of financing which carried some of the defects of PFI would not be the right way forward'.
Reports in The Times today indicate local authority chiefs will meet with officials from the Treasury this week to discuss using LGPS funds for local projects.
In addition, proposed government reforms to PFI announced in December don't go far enough in discouraging Whitehall departments from further dependence on off-balance sheet funding, the report advises.
Andrew Tyrie, chair of the Treasury Select Committee said the Government's response ‘does not fully address our argument that the system of national accounting continues to provide an incentive to use PFI because such liabilities are excluded from Public Sector Net debt'.
‘We must avoid using PFI solely as a means of placing Government finance off-balance sheet. Value for money is crucial,' Mr Tyrie said.
