Joint Committee on Statutory Instruments Ninth Report


Memorandum from the Department for Education and Skills


1. The Committee has requested a memorandum on two points relating to the School Companies Regulations 2002.

(1) Explain the meaning of "private finance initiative credits" in regulation 3(4), and where that expression is defined.

(2) Regulation 8(2)(d) requires the constitution of a school company to provide that the terms of service and remuneration of the executive directors shall be determined either by the directors as a whole on the recommendation of the remuneration committee, or by the remuneration committee alone. Given the underlined words, why does sub­paragraph (c) require the constitution to provide that the remuneration committee shall recommend to the directors the terms of service and remuneration?

2. With regard to point (1), the expression "private finance initiative credits" is not defined within the School Companies Regulations 2002 nor is it defined elsewhere in legislation. The Department takes the view that, whilst the expression is a technical one, its meaning is certain and is well known to the main users of these Regulations, i.e. maintained schools and local authorities. The term is widely used in both central and local government and the education sector. For example HM Treasury allocates an annual quota of PFI credits to each central government department. The term is also used on the ODPM website.

3. Further, a definition of the expression without an explanation of how such a credit fits into the capital finance system of local authorities would not be particularly helpful. This is especially so because the majority of private finance initiative credits have no actual function within the capital finance system but are simply an administrative device giving rise to an appropriate level of revenue support to authorities. The expression "private finance initiative credits" would need a very detailed and potentially confusing definition. The terms which would need be used to define it are less familiar than the expression itself and are set out in paragraph 4 below. The Department's view is that to define the expression in the regulations would cause more doubt than to leave it undefined.

4. The meaning of "private finance initiative credits" is as follows. It is a notional credit approval or non­scoring credit approval, issued by a government Minister to a local authority which specifies that it is to be used for particular capital purposes under the private finance initiative. If it is a "notional credit approval" then it does not actually allow a local authority to borrow money or provide any credit cover, it is simply a device to ensure the local authority receives an appropriate level of revenue support and is able to treat the transaction as off­balance sheet. If it is a "non­scoring credit approval" then it provides the necessary credit cover for the local authority to be able to finance the project without sacrificing existing capital resources. It is referred to as "non­scoring" because such an approval can be issued without it scoring as public expenditure. A "non­scoring credit approval" is issued under section 54 of the Local Government and Housing Act 1989 as a supplementary credit approval.

5. With regard to point (2) the Department accepts that there is a slight inconsistency between sub­paragraphs (c) and (d) of Regulation 8(2) and will amend this Regulation in due course.

6. The Department would also draw to the Committee's attention another statutory instrument which was laid before Parliament on 19th December 2002 ­ The School Companies (Private Finance Initiative Companies) Regulations 2002 (S.I. 2002/3177). Regulation 3(4) of those Regulations makes use of the expression "private finance initiative credits" and the expression is not defined in those regulations either. We would ask the Committee to take the explanation in this memorandum into account when considering those regulations.

23 January 2003

previous page contents next page

House of Lords home page Parliament home page House of Commons home page search page enquiries index

© Parliamentary copyright 2003
Prepared 12 February 2003