§ There are many services that the Government have a duty to ensure are provided as public services, but where private sector management skills and expertise can improve delivery to the public. That is where the private finance initiative comes in.
§ Under the private finance initiative, the public sector does not simply sign a contract to buy a prison, a train or a computer system. It pays to have specific services supplied at guaranteed levels of performance—available prison places, trains running reliably on the Northern line, national insurance records kept up to date. [Interruption.] The Opposition had better make up their mind whether they agree with that policy or not. It rather depends which day of the week it is or which spokesman is speaking, as far as I have been able to see. The Government choose the quality services that the public require, and then go out and acquire those services from private companies with the finance and expertise to deliver.
§ The key point is that the initiative delivers infrastructure projects of higher quality at a lower overall cost to the British taxpayer. That is because the private sector puts its own money at risk and brings its own management skills to bear.
§ The initiative means that better public services will be provided by better private means. The service remains a public service and the taxpayers get a better deal. No wonder some of our critics have decided to copy our innovative policy. [Interruption.] We are now, as the deputy leader of the Labour party demands, far beyond the stage of simply identifying projects. The money is starting to flow. We expect actual capital spending under the private finance initiative to be around £2 billion per year and rising over the next three years. We expect to have agreed contracts worth at least £14 billion by the end of 1998–99.
§ That money is replacing old-style public sector capital spending and it can deliver big gains in value for money for the taxpayer. In the past, cost overruns and delays were typical of public sector capital projects. The private finance initiative is delivering better-quality projects. To take two well-known examples, the PFI contract for Northern line trains specifies reliability levels that are nearly four times above the best fleet currently operating on London Underground. The service that we shall get from the new national insurance records system could have cost up to twice what we shall pay under the privately financed deal that we have struck. As a result of those flows of private finance, we have been able to find 1062 savings in publicly financed capital while maintaining overall high levels of investment activity and high-quality investment.
§ Let me just illustrate progress with another four projects that demonstrate the extent to which the private finance initiative is spreading to all parts of Government activity. First, I can announce a huge new package of privately financed roads, five new projects with a capital value totalling £500 million. Secondly, my right hon. Friend the Secretary of State for Health has announced today that a £35 million deal is going ahead to modernise two hospitals for the South Buckinghamshire NHS trust. Thirdly, we are tendering for the refurbishment of Lowdham Grange prison, a £50 million project to add to the two new prison building contracts at Bridgend and Fazakerley, which will be signed shortly. Finally, full bids will be due on 5 December for the £45 million water project in Inverness and Fort William. My hon. Friend the Financial Secretary to the Treasury will be publishing more details tomorrow on the real progress of the private finance initiative.
§ In the 1980s, our privatisation programme brought enormous benefits to the British economy. Our private finance initiative can and will do the same in the 1990s and beyond.