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Public sector being 'outwitted' in PFI refinancing deals

A House of Commons report published today has found that the public sector is losing out when PFI deals are refinanced.
Public Accounts Committee chairman Edward Leigh said: 'Local public sector officials taking forward PFI projects such as hospitals or schools are often painfully lacking in commercial experience. The ill-conceived Norfolk and Norwich Hospital refinancing in 2003 demonstrated this all too clearly. Staff negotiating the fine print of refinancing clauses in contracts, where the risks to the public sector can be high, must be trained so that they are not outwitted by their commercially-sophisticated private sector counterparts.'In 2002 the government introduced new arrangements that forcing the private sector to share refinancing gains with the public sector. The Office of Government Commerce said it expected gains of £175M to £200M but up until December 2006 only £93M had been secured.'Proceeds gained by the public sector from PFI debt refinancing under the voluntary code for the sharing of gains are currently well short of expectations. It might be that the code as it stands does not encourage smaller refinancings. A sliding scale of sharing of gains might encourage more refinancings with benefits to both public and private sectors.'

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