Scottish Executive Finance

– Scottish Parliament written question – answered on 17th January 2003.

Alert me about debates like this

Photo of Andy Kerr Andy Kerr Labour

Technical Note No. 1 (Revised), How to account for PFI Transactions , is about the practical application of accounting standards which determine how PFI schemes are to be reported in the annual accounts of both the purchasers and operators. In particular, it is used to determine in which set of accounts the property associated with the PFI scheme is to be reported. The accounting treatment follows the requirements laid down by the Accounting Standards Board, which aim to ensure openness and clarity in published accounts. The guidance was effective from September 1998, and applied retrospectively.

Under resource accounting, a change in a PFI project’s accounting treatment from being "off balance sheet" to being "on balance sheet" has an impact on the budgeting process for departments and sponsored bodies. When Technical Note No.1 was issued, the Treasury agreed that where the accounting treatment changed for existing PFI schemes, this should have no impact on the departments or sponsored bodies concerned. This concession was allowed because departments would have been unaware of the change in accounting treatment at the time of signing such a PFI contract and it was deemed unfair to penalise them for a change which was outwith their control.

The only contract in Scotland affected by the change of treatment is that for the new Edinburgh Royal Infirmary (RIE). The PFI contract for the RIE was signed in September 1996, and when the new guidance was applied retrospectively to the contract, the accounting treatment was revised to report the deal as being on the balance sheet of Lothian University Hospitals NHS Trust. Stage 1 of the scheme became operational in January 2002, and the annual accounts of the trust for 2001-02 reflect £70.6 million on the balance sheet for that element. Stage 2 of the scheme is expected to be operational in spring 2003, by which time the capital value of the whole project (£252 million) will have been reflected in the trust’s balance sheet. The change in accounting treatment does not change the value for money assessment of the scheme.

The Chancellor of the Exchequer has agreed that the Executive’s budget will be adjusted to reflect this in 2001-02 and 2002-03 in respect of the PFI scheme at the RIE. Therefore there is no net impact on the Executive’s Budget from the application of Technical Note No.1.

Does this answer the above question?

Yes1 person thinks so

No0 people think not

Would you like to ask a question like this yourself? Use our Freedom of Information site.