The Apollo Project
Liberal Ideas for the 21st Century
Saturday, August 27, 2005
It's an alphabet soup out there…
By Peter

The PFI (Public Finance Inititive) was originally a Tory dodge to allow the government to borrow without affecting the PSBR (Public Sector Borrowing Requirement). Gordon Brown kept it going when he took over at the Treasury. It continues to mean that - Enron-style – debt is kept off-balance sheet. But these days the key aggregate affected is PNSD (sounding like a minor Italian Political Party, but actually the Public Sector Net Deficit). Brown is seeking to keep this below 40% of GDP (or should that now be 40% of GNI?).

Public Finance report that Len Cook, the Kiwi national statistician now coming to the end of his term of office has decided that the PSND cannot exclude this borrowing. As a result the PSND/GDP ratio will edge closer to 40%.

It's another small blow to Brown's reputation for prudence, and to the PFI project.

A couple of questions arise. The accounting treatment of PFI has been controversial from the outset. But why is the national statistician blowing the whistle? Shouldn´t the Treasury, The PAC (Public Accounts Committee) or NAO (National Audit Office) have done so long ago? Perhaps someone should ask David Davis or Eduard Leigh (former and current Chairmen of the PAC and actual or putative candidates for the Tory leadership).

Lib Dems have generally been hostile to PFI and will shed no tears over the changes. But somewhere in the bathwater of PFI there is a baby worth saving. The public sector has not been good at large capital projects and should be able to learn something from the private sector. Perhaps, without the distraction of Brown's creative accounting, we can come up with a more effective model of cooperation.
posted by Apollo Project @ 2:05 pm  
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"What is Liberalism?: I should say it means the acknowledgment in practical life of the truth that men are best governed who govern themselves; that the general sense of mankind, if left alone, will make for righteousness; that artificial privileges and restraints upon freedom, so far as they are not required in the interests of the community, are hurtful; and that the laws, while, of course, they cannot equalise conditions, can at least avoid aggravating inequalities, and ought to have for their object the securing to every man the best chance he can have of a good and useful life." C-B.


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