Recommendation 14

Historically, private financing was sometimes selected over public financing because it did not increase short-term government borrowing. This kept public sector debt levels down, as the assets were considered off-balance sheet for national accounts purposes. The Office for Budget Responsibility called this a “fiscal illusion”: where the accounting measure does not reflect the true fiscal implications of a transaction.26 We asked the Treasury whether infrastructure financed through Public Private Partnerships should be on or off balance sheet. The Treasury told us that the Green book stipulates that the balance sheet classification of a project should not be a determining factor of whether a particular financing model is chosen and that the focus should be on choosing the correct structure to ensure the project will be delivered well and provide value for money, whether on or off balance sheet.27 Centrally held data on private finance