UK - The UK's Treasury should only continue using Private Finance Initiatives (PFI) if it grants the best value for money - rather than opting for the funding approach because it allows new debt to be kept off the government's balance sheet, a parliamentary committee has warned.

The Treasury has further come under fire for backtracking on changes to the PFI, with the Treasury select committee arguing that it reveals an attempt to disguise the "true nature" of the vehicle's methods of funding.

In its report, the committee noted that responses from chancellor George Osborne's department were "inconsistent", noting that gilt issuances remained the most cost-effective way for capital to be raised.

"In its response to our recommendation in paragraph 94, the Treasury said any consequential increase in public borrowing might compromise the achievement of the fiscal targets," the committee said.

"This could be taken to mean that PFI is still used, at least in part, as a means of off-balance-sheet finance, rather than because it represents the best financing method available."

It also criticised what it saw as government backtracking on pledges to simplify the PFI system.

As part of 2010's Comprehensive Spending Review, Osborne promised to abolish PFI credits.

The credits, whereby infrastructure projects are pledged a certain level of private sector investment once they become operational, were meant to be scrapped as a means of improving both the vehicles' cost efficiency and transparency.

However, the committee argued that the so-called Waste Infrastructure Credits (WIC) mentioned in the National Infrastructure Plan 2011 and unveiled by chancellor Osborne last year were simply the credits "rebadged".

It said: "The government must make clear exactly what action it took with respect PFI Credits in 2010, and why they are apparently now being reclassified as Waste Infrastructure Credits, a term that will disguise their true nature."

The WIC are being used to credit more than 30 waste treatment developments with £2bn (€2.4bn) in funding, aimed to reduce landfills by 2020.

The committee was more complimentary of Osborne's proposals to attract pension fund investment to infrastructure projects, deeming them "sensible".

But it warned that they nonetheless posed a risk to the Exchequer.

"There are risks associated with the methods proposed by the government [in the National Infrastructure Plan 2011] that involve taking on further contingent liabilities or providing guarantees, which could crystallise into calls on public funds," it said, adding that the back-door creation of further financing carrying the "defects" of PFIs was not the way forward.

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