Download or read book Financing PFI projects in the credit crisis and the Treasury's response written by Great Britain: National Audit Office and published by The Stationery Office. This book was released on 2010-07-27 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: By setting up an Infrastructure Financing Unit, HM Treasury helped reactivate the lending market for private finance projects which was putting government PFI programmes in doubt as a result of the credit crisis. While the extra finance costs for projects in 2009 were value for money in the short term to stimulate the economy, the Treasury should not presume that continuing the use of private finance at current rates will be value for money. In line with policy on acting to stimulate the economy, the Treasury and other government departments gave priority to closing deals at the prevailing market rates, even if this meant the public sector paying more, and the banks carrying less risk. Analysis by the NAO suggests that higher financing costs increased the annual charge of PFI projects by six to seven per cent and that between £500 million to £1 billion of higher cost has been built in over 30 years, partly offset by an increased public sector share of refinancing gains. The NAO also considered whether reconsidering business cases would have improved value for money. The NAO found that this might have put policy objectives to give a boost to the economy at risk and would not have been a reasonable yardstick to assess the protection of value for money. The NAO recommends that there now be a thorough project by project review of the forward programme to apply more exacting and narrower criteria than applied to projects at the height of the crisis