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Old 27th Jan 2008, 17:19
  #17 (permalink)  
XV277
 
Join Date: Mar 2004
Location: at the end of the bar
Posts: 484
Originally Posted by Squirrel 41 View Post
As knowitall has (rightly!) said, the big presentational benefit of PFI for the government is that the contractor borrows the money and therefore it isn't public debt and therefore doesn't appear in the Public Sector Borrowing Requirement (PSBR).

Add in the "Golden Rule" (authors: G Brown and E Balls), which says that over the economic cycle UK will only borrow to invest (ie, no debt for provision of services in any one year), and that the level of debt will be "prudent" ie, c. 40% of GDP (vs 100%+ in Italy and 140%(?) in Japan), then the attraction for 3bn (0.2-0.3% of GDP) of debt on someone else's balance-sheet (AirTanker, in this case) is very attractive as it "isn't" public debt.
Which is also why they are so desparate to get the NR clusterf*ck sorted out through a bond/private sector deal.
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