The idea of the Private Finance Initiative began in the UK but is now
being used all over the World.  One of the main attractions for
governments is that instead of the government borrowing or spending
its own reserves to build a public facility, the borrowing is incurred
by the private sector company which the government appoints to
construct the project and then operate it for 30 or so years before it
returns to the public sector.  This borrowing is apparently "off
balance sheet" for the government and therefore the government can
stay within the limits its has set itself for public borrowing by not
counting this borrowing.  The reality is that instead of paying
interest on a loan used to build the facility and then paying the
costs of operating and maintaining it for the same period, it simply
pays an annual service charge to the private company which borrowed
the money.  One way or another the government is committed to making
payments for the lifetime of the project.

This all seems obvious to me as a layman and I cannot therefore
understand why this method of financing is considered not to place the
government in the same position as if it borrowed.  I understand that
there are limits on public sector borrowing imposed by the EU on
members of the EURO zone but that PFI service charges are not counted
towards this.  it all sounds like accountants tricks to me and I
cannot understand the logic in public policy terms why this commitment
is treated any differently from a commitment to repay a loan and pay
interest on it.  If I lease a car my personal finances at the end of
the lease are no different from what they would have been if I had
borrowed at the same interest rate to buy it so why should a country's
finances be any different?

Incidentally I understand all the other reasons given for PFI -
private sector efficiency, more flexibility etc.  These may or may not
be valid but they are separate arguments.

In short can someone explain why a committment to a service charge for
30 years is treated any differently for national accounting purposes
than a committment to repay principle, pay interest and maintain and
operate a facility?  How does the EU actually treat such committments
when it considers the critereia for membership of the Euro, and how
does it justify it?

Because PFI appears as a liability in the balancesheets.

Remember that PFI includes entering into long term contractual
agreement with public sector.  In the nutshell, government is paying
the private sector annual unitary charges - sort of pay as you go
rather than lumpsum for each project.