The government operates under FRS3. Government accounts have to be compatible with FRS3. PFI contracts that can’t be escaped are treated as finance leases not operating leases.

My original point, however, was based on the oft-repeated claim that the government is responsible for the debt held by PFI SPVs. This only happens when the SPV’s debt is guaranteed by the Treasury, which only happens when everyone concerned agrees to sign a contract that they know to be really really stupid in order to stitch up Ken Livingstone…

Ironically given the standard lies about lack of financial transparency, the current lot have been pretty good at aligning government accounts with GAAP – the “double off balance sheet” thing is more or less an urban myth created by morons who don’t understand PFI.

“What benefits are understated?” – the fact that government is generally unspeakably bad at project management, implementation and cost control – so while most PFIs do feature a large margin for the PFI company, most of those have still been cheaper than getting it done by the comedians who would otherwise have got it done…

I understand, but don’t quote me on this, that the government is falling into line and adopting IFRS, which should stop some of the weirdness. (That said, any privately held PFI company will still be reporting under UK GAAP in its stat accounts).

What benefits are understated? The only one I can think of that isn’t usually mentioned is that it hampers the Tories should they wish to pay for tax cuts by freezing or cutting funding for public services, as they’ll be dealing with hard-nosed businessmen rather than public sector managers. It thus ties any future Tory government into either a minimum level of public service spending or renouncing their business friendly market-led approach to public services.