Government looks to ditch PFI model

The Treasury has announced this morning that it will be reviewing the private finance initiative (PFI) and consider other delivery models.

The Chancellor George Osborne,launching the review said

George Osborne, said:

“We have consistently voiced concerns about the misuse of PFI in the past and we have already taken steps to reduce costs and improve transparency.

”But the review I have announced today will take this a step further with a fundamental reassessment of PFI. We want a new delivery model which draws on private sector innovation, but at a lower cost to the taxpayer and with better value for public services.”

The model set up under Labour,has come under a great deal of criticism as the rising costs of debt finance since the credit crunch meant the scheme,where contractors finance, build and run projects,may not represent value for money.

The Treasury says that its approach to reform the PFI model will look to create a model which is cheaper, accesses a wider range of private sector financing sources and strikes a better balance of risk between the private and the public sectors.

Far-reaching changes to encourage future growth to help credit unions and co-operatives is introduced

Legislation that is designed to help credit unions and co-operatives compete and grow more effectively has completed its Parliamentary passage,the Treasury has announced today.

The Legislative Reform Order (LRO) will come into force on 8 January 2012 and is intended to promote mutuals.

The legislation will enable credit unions to accept new types of members, such as partnerships and limited companies,and allow interest to be offered on deposits.

Announcing the passage,Financial Secretary to the Treasury, Mark Hoban said:

“I want to see credit unions grow to meet the needs of their members and communities they serve.

Mark Lyonette, Chief Executive of the Association of British Credit Unions (ABCUL) said:

"Credit unions in Britain are delighted that legislation reforms have been agreed by Parliament which free up the sector to compete on a more level playing field. ABCUL has campaigned long and hard for these changes, so we're happy that credit unions will be able to use the new powers from the New Year."

Treasury closes barn door after horse bolts

I note that the Treasury are undertaking a review of its response to the financial crisis.

The review is being led by Sharon White, formerly a Director General at the Ministry of Justice and the Department for International Development.

Its terms of reference include,examining its capability on financial services ahead of the crisis and whether the capability and senior management arrangements put in place to handle the crisis and the aftermath have been adequate.

The review follows recommendations from the Public Accounts Committee and the National Audit Office and the final report will be presented to the Treasury’s executive management board “no later” than Easter 2012.

An excuse to party?

Yesterday's front page splash by the Mail on Sunday about trasury officials clebrating Burns night on the day that Britain officially dipped into recession is replied to by Iain Martin over at three line whip.

He points out that

So, a bunch of people held a party they paid for. This kind of thing will
continue to happen even in a recession. It may become more commonplace.

and adds that

Read any decent set of Second World War memoirs (Alanbrooke, Colville etc)
and drink and fun gatherings are a constant even when money gets tight. There
was a war on and people put a good deal of effort into cheering themselves
up.

The balancing effect

When Phil Wollass,Labour's envirnomental spokesman appeared on Newsnight following the fuel protests he was quite adamant that the Treasury was losing out as the price of fuel increased.

Over at Ft.com blogs they are not so sure.

They quote Maurice Fitzpatrick of Grant Thorton who says

Tax revenues from North Sea oil would jump from an estimated £10bn - struck when oil was only $84 a barrel - to £16bn at the current price of about $128 a barrel.
Since the Budget in March, the Treasury has already taken an estimated £820m more than its forecasts in North Sea oil tax.
The £6bn of surplus revenue would easily cover the cost of U-turns on both fuel duty and vehicle excise duty, where ministers are introducing new bands which could cost an extra £200 for drivers of inefficient cars.
Deferring the 2p increase in fuel duty by six months would cost £550m. Scrapping the revamped vehicle excise duty altogether would mean the loss of an estimated £465m next year and £735m next year - although ministers may only remove the retrospective element of this tax.

The tresury begs to differ

* an increase in pump prices leads to an increase in inflation. This knocks through to the inflation-linked payments that the government has to make, including benefits, pensions, tax allowances, and government bonds.

* reduced demand for fuel from filling stations, which reduces revenue from fuel duties - as this is fixed at 50.35p per litre if people buy less fuel, revenue from this falls

So who is right or are they both right and does this simply fall into the so called balancing effect?