One of the key benefits of PPP has always been the 'additionality' of investment that off-balance sheet treatment can offer. However, the emergence of the European System of Accounts (ESA10) heralded a shift away from established principles of risk and reward in the assessment of balance sheet treatment, towards an increased focus on rewards and control. It is this shift under Eurostat's interpretation of the ESA10 rules that has been at odds with modern PPP models and caused many important infrastructure projects across the UK to currently stall.
As member states meet with Eurostat in July to discuss the implications of ESA10, a different question emerges for the UK: is Brexit an opportunity to unblock this stalled pipeline and deliver the new infrastructure that will be important to the UK building and maintaining a strong economy and global profile in the new world we find ourselves in after Brexit?
ESA10 is an internationally devised and applied accounting framework that provides a detailed description of a total economy and it's sectors, including the government sector. It is derived from, and broadly consistent with, the worldwide UN System of National Accounts (SNA08) and both contain chapters on PPP. However, the focus of SNA08 remains centred on a conceptually similar but not identical risk/reward analysis, it does not make a distinction between PPP and Concessions and there is less central guidance and direction on interpretation.
Whilst we cannot determine exactly what direction further guidance on ESA10 will take following the Eurostat meeting in July, when and if ESA10 will cease to be applicable to projects in the UK as a result of Brexit, or indeed how SNA08 might be interpreted by the Office of National Statistics in the UK, in order to resolve the uncertainty and take a positive step towards unblocking the pipeline of stalled projects, Brexit does provide the UK with an opportunity to grasp the nettle at a local level and adopt a different approach to its EU neighbours - one which is clear in its parameters, offers an opportunity for additionality of investment in times where capital budgets are constrained and one which is not at odds with modern structures that promote value for money, transparency and stakeholder involvement in the procurement of public assets.