The Government faces breaking one of its closely watched borrowing rules, after a key advisory committee urged it to add more Public Finance Initiative debt to its books.
The development could cause the national debt to bulge, as the cost of hundreds of new hospitals and building projects is added to its accounts.
The Financial Reporting Advisory Board (FRAB), a body which advises the Government on its accounts, has indicated that the Treasury's previous definition of what PFI debt should fall on its books should be scrapped. A FRAB working group said the way the Government accounts for PFI makes it too easy for it to manipulate the figures so they either fall inside or outside its own debt totals.
The finding, which is expected to be endorsed by the FRAB, undermines recent calculations from the Office for National Statistics finding that only £5bn worth of PFI debt should be added to the national accounts. Its figure was far shy of the combined £48bn value of all PFI projects - but only because NHS debts were classified as belonging to the private sector.
The FRAB's working group warned that many of the PFI debts were being left off the balance sheets of both private and public sectors. It has urged the department to withdraw the system no later than 2008-09.
Some analysts think this could add an extra £20bn to the UK's net debt, potentially catapulting it above the 40pc of gross domestic product level Gordon Brown pledged to avoid under the terms of his sustainable investment rule.
George Osborne, the shadow chancellor, said: "Gordon Brown's trick of using PFI to hide debt off the nation's balance sheet is catching up with him."
Government told to add PFI debt
Posted - 27 March 2007 : 09:57:52
