HC Deb 12 March 1996 vol 273 cc808-86

Order for Second Reading read.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

I must inform the House that Madam Speaker has selected the amendment in the name of the Leader of the Opposition.

4.46 pm
The Secretary of State for Health (Mr. Stephen Dorrell)

I beg to move, That the Bill be now read a Second time.

The question before the House this afternoon is extremely simple—whether the national health service should pay its debts. Until three months ago, I assumed that there was no doubt about that, not only in my mind but in anyone else's mind. It seemed to me inconceivable that anyone could believe that a public sector national health service should be expected to or have the freedom to walk away from its debts.

Still more unthinkable in my mind, until a few weeks ago, was any suggestion that the Opposition would think it desirable policy to advocate the proposition that the NHS should walk away from its debts—but that, apparently, is the argument that the House will hear in the debate this afternoon. I look forward to hearing that argument advanced because I am absolutely confident not only that it is one with which I shall not agree, but that no one outside this House will agree that the NHS should be free to walk away from its debts.

Mr. Kevin Hughes (Doncaster, North)

Does that mean that the Secretary of State will have a say in what those debts are? Or will it be a case of, "You borrow as much as you like and I, Secretary of State, will pick up the tab"?

Mr. Dorrell

That is an absurd proposition. As I shall show, controls have been, are and will remain in place to limit the borrowings of NHS trusts. They are unaffected by the Bill, which deals with a very simple question—whether NHS bodies should meet their liabilities.

Dame Elaine Kellett-Bowman (Lancaster)

Does my right hon. Friend share my astonishment that the Labour party dares to talk about paying debts? When the Labour party was in office, national health service hospitals never paid their debts on time and inflation was as high as 27 per cent.

Mr. Dorrell

My hon. Friend is entirely right: in the late 1970s I was a business man and NHS bodies were among the customers that I supplied. In those days, the NHS was famous for paying its debts late—but that situation has improved dramatically in recent years.

The question before the House is whether the public sector, particularly the NHS, should pay its debts. Until a few days ago, I had understood that it was Labour's position that the public sector should pay its debts—it did not occur to me that there was a distinction between the two Front Benches on this proposition. I thought that the Labour party believed that the NHS was a key part of the public sector and that it believed that the public sector, including the national health service, should pay its debts.

I thought that the Labour party was opposed to the proposition that the national health service should be a privatised institution.

Mr. Hugh Dykes (Harrow, East)

I share my right hon. Friend's astonishment and dismay at the perceived attitude of the Opposition.

Ms Harriet Harman (Peckham)

You have not even heard it yet.

Mr. Dykes

I am referring to what we have seen so far in relation to the Opposition's reaction to the Bill. Is it not more ominous than that? I thank my right hon. Friend for introducing this crucial Bill. I declare an indirect interest in that I have a constituent who has a company that is involved in helping with these matters. Is not the danger of the Labour party's destructive attitude, which is ominous, in opposing the Bill—I hope that it passes—that it will stop some crucial transactions from going ahead which would help the public in terms of new hospital developments? That will be directly the fault—

Mr. Deputy Speaker

Order. The hon. Gentleman has made a long intervention. I would like a bit of order from the Government Front Bench and from the Opposition Front Bench.

Mr. Dorrell

I am grateful to my hon. Friend the Member for Harrow, East (Mr. Dykes) for raising that point and he is entirely right. If the Labour party sustains the view that it is reported to have taken in this morning's Financial Times on the tapes earlier today—that the NHS should be free to walk away from its debts—private finance initiative partners will not see the NHS as a credit-worthy borrower under a Labour Government and all its trading relationships will be affected. As my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) reminded hon. Members, that would be a return to the payment record of the NHS when the Labour party was in power.

I have introduced the Bill because approximately three months ago it was pointed out to me that there is a weakness in the National Health Service and Community Care Act 1990

Mr. Alan Milburn (Darlington)

Why did you not know?

Mr. Dorrell

Because I do not know the National Health Service and Community Care Act 1990 off by heart—and I presume that the hon. Gentleman does not either. It was pointed out to me that schedule 2, paragraph 30, of the Act—which is at the forefront of the hon. Gentleman's mind; he knows every detail of every schedule of the Act—contains the following provision: If an NHS trust is dissolved under this Part of this Schedule, the Secretary of State may by order transfer—

Ms Harman

I know.

Mr. Dorrell

The hon. Lady may know, but other hon. Members probably have not memorised this schedule. It continues: "or provide for the transfer to—

  1. (a) the Secretary of State, or
  2. (b) the health authority, or
  3. (c) another NHS trust,
of such of the property, rights and liabilities of the NHS trust which is dissolved".

In other words, I have the power to deal with the liabilities of an NHS trust—I do not have the duty to deal with the liabilities of an NHS trust that is to be dissolved. That was the provision contained in the National Health Service and Community Care Act 1990 and in case any hon. Member thinks that this is an oversight associated specifically with that Act, it is worth referring to the fact that the National Health Service Act 1977 contained an even more general proposition, which is that an order of this kind may contain such provisions for the transfer of officers, property, rights and liabilities as the Secretary of State thinks fit". In other words, the door is left completely open—particularly in relation to the reorganisation of a trust—for the Secretary of State to reorganise the trust and to make no provision for the liabilities of that trust. That seems to me to be a wholly unsatisfactory basis on which to expect people to trade with NHS trusts.

Mr. Simon Hughes (Southwark and Bermondsey)


Mr. John Gunnell (Morley and Leeds, South)


Mr. Dorrell

I shall give way in a moment. It is unsatisfactory for people engaging in long-term investments to support a trading relationship with an NHS trust. As I said to the Treasury Select Committee a few days ago, it is equally unsatisfactory from the point of view of the potato supplier to the hospital. Whatever the basis of the trading relationship, it is completely unsatisfactory that traders dealing with trusts should face a position where the Secretary of State has the power to reorganise the trust without making any provision for the liabilities of the trust.

Mr. Simon Hughes

I understand the point that the Secretary of State has made and I also understand the original Act. If national health service trusts have to submit their accounts every year—and they are looked at by the regional office, by the executive or the Secretary of State—and if all capital projects have to go through the accounting officer procedure and be approved, what are the circumstances in which the Secretary of State envisages that a trust would be in such a position that it would be at the risk of ending its life by the writ of the Secretary of State with a great amount of debt yet to be paid? If that were to happen, why would it not be dealt with in the normal way—by an insurance policy that ensures that the debts will be met?

Mr. Dorrell

I followed the point made by the hon. Gentleman until his last phrase. The answer to the first part of his question is that I can conceive of no circumstance where it would be in the public interest for me to use the discretion that is left to me in the legislation, and that is why I am in favour of removing it. The hon. Gentleman asked why a trader cannot insure against the possibility that I might use that discretion. Surely the answer is that it would be absurd for the public sector to pay, through a trading relationship with a trader, to insure against a risk of the Secretary of State doing something that he has not got the slightest intention of ever doing. It would be much cheaper and much cleaner to remove a discretion that I have made it abundantly clear that I have not the slightest intention of ever using.

Mr. Hughes

I understand what the Secretary of State is saying. He concedes that one way of dealing with it is that there is an insurance that covers the risk of any arm of the NHS being in a position where it could not meet its debts—I was not talking about the insurance of the trader with the NHS, but about NHS bodies, such as the trust. That is one way of doing it, but the Secretary of State is saying that he would rather not do it that way but would rather legislate so that it is on the face of an Act.

Mr. Dorrell

That is exactly the position: I can conceive of no circumstance in which it would be legitimate for a Secretary of State to use the discretion. Therefore, I am in favour of removing the discretion—and that is the sole purpose of the Bill. As soon as I was told about the position in the existing legislation, I decided to remedy it. I have no doubt whatsoever about the public's view of this issue: they regard the national health service as their health service; they believe that the national health service should meet its obligations, just as the overwhelming majority of our fellow countrymen believe that they have a duty to meet their obligations; and they would be outraged at the proposition that I should come to the Dispatch Box and defend the right of the NHS to do a moonlight flit on its liabilities.

That is the case that the Labour party is reduced to making in this debate. It is reduced to defending the right of any Secretary of State for Health to walk away knowingly from the liabilities properly entered into by the national health service. It is no good the hon. Member for Peckham saying that that is not true, because that will be the result of voting against the Bill.

Mr. John Spellar (Warley, West)

I thank the Secretary of State for giving way—he has made the same point about eight times and at different levels of volume. As the National Health Service Act 1977 contained a similar provision, why have these problems been created so suddenly?

Mr. Dorrell

I have made no secret of the answer to that question, which is that the issue has not previously arisen. If the inadequacy of the present provision had been drawn to the attention of any of my Conservative or Labour predecessors, they would have tackled it as I am tackling it. [Interruption.] I have answered the question—because it was pointed out to me. [Laughter.] It seems to me that—

Mr. Deputy Speaker

Order. The Chair is finding great difficulty in following the debate. He cannot hear what the Secretary of State is saying.

Mr. Dorrell

It is not difficult to defend the proposition that if someone says to a Secretary of State in charge of a major public service that the condition of the current law is unsatisfactory—and I consider the condition of the current law and find it unsatisfactory—I should place the unsatisfactory provision before the House, as I have done, and ask the House to remedy its unsatisfactory nature.

Mr. Eric Martlew (Carlisle)

The Secretary of State said several times: It was pointed out to me". Who pointed it out to him? Was it the banks, who were failing to support PFI schemes? Is that why this legislation is being rushed through the House tonight?

Mr. Dorrell

We have legislation that is brought before the House in the usual course of events to remedy something that is unsatisfactory in the present state of the law. The Opposition ask who pointed it out. It was the people with whom we are negotiating about the private finance initiative. [HON. MEMBERS: "Oh."] The House expresses surprise. If the House had read the evidence that I gave to the Treasury Select Committee a fortnight ago, it would have found that I have never made a secret of the fact that those people raised the matter. It does not seem to me to matter who raised it. What matters—

Mr. Gunnell

Will the right hon. Gentleman give way?

Mr. Dorrell

Not at the moment, because I am answering the previous intervention.

What matters is the simple question, should the NHS preserve its current discretion to walk away from liabilities properly entered into? That is the only question in the Bill that the House must decide. If Opposition Members walk through the No Lobby later, they will be voting for the NHS to walk away from liabilities properly entered into by the management structure established by the House and charged with managing the national health service.

Mr. Sam Galbraith (Strathkelvin and Bearsden)

The Secretary of State has just admitted that there are no conceivable circumstances in which the Secretary of State and the NHS would walk away from liabilities. Why, therefore, did those individuals or groups of individuals draw that problem to the attention of the Secretary of State? Did they not believe the Secretary of State about that?

Mr. Dorrell

Perhaps they have heard the utterings of Opposition Members and are worried that Labour Members might at a time far in the future walk away from the liabilities of the health service. In those circumstances, potential traders are entitled to the assurance that the NHS will not exploit a freedom to do a moonlight flit. It is the type of behaviour that, when undertaken by directors of bankrupt shyster companies, leads to those directors being revealed on television by Esther Rantzen and her like. To argue as a specific proposition that people should be free to walk away from a liability entered into legitimately, is an activity associated with shyster, second-rate lawyers. I am amazed that the Labour party and Labour Front Benchers should want to have anything to do with such behaviour.

Mr. Gunnell

Would it not be fair to say that the Secretary of State has been told that none of the contracts for those private sector initiatives can be signed because the clause is not in place?

Mr. Dorrell

It is certainly not true that no PFI projects can go ahead because of the absence of the clause.

Mr. Gunnell


Mr. Dorrell

Signed, go ahead—I accept the amendment. I can say that with total confidence because 48 schemes, costing a total of £225 million, in the NHS private finance initiative have already gone ahead.

Mr. Spellar

How many are held up?

Mr. Dorrell

Because they are in the national health service, they are all health-related schemes. We are negotiating with partners the details of arrangements that have already been announced, and later I shall talk about the others that are still being assessed. We are negotiating with partners the terms on which those contracts will go ahead. The inadequacy of the law was revealed in the context of those discussions, and it seems to me straightforward that the House should remedy a weakness in the law.

I have absolutely no doubt that the public view of that question would be that the NHS should pay its debts. That is the question that the hon. Member for Peckham must answer. The Bill does not change the powers and duties of trusts, which are set out clearly in the legislation. Schedule 2, paragraph 6 of the National Health Service and Community Care Act 1990 says: An NHS trust shall carried out effectively, efficiently and economically the functions for the time being conferred on it". The financial control regime of trusts places three clear financial obligations on trusts—to break even taking one year with another, to stay within the external financing limit of the trust and to deliver a 6 per cent. return on average relevant net assets.

Ms Harman

Where is the statute?

Mr. Dorrell

It is in section 10(2) of the National Health Service and Community Care Act 1990. Section 10(1) of the 1990 Act imposes an explicit obligation that every trust shall ensure that its revenue is not less than sufficient, taking one financial year with another, to meet outgoings properly chargeable to revenue account. That is one of the three financial obligations of the trusts. The other two were set out clearly in the financial control regime.

I give the hon. Lady an undertaking. If she can produce any demonstrable example of trusts borrowing irresponsibly and using their power to borrow in a way that does not match the external financing limit controls and the requirement to operate effectively, efficiently and economically within the 1990 Act, I will use the power set out in section 10(2) that allows me to define that as a statutory obligation. At the moment, there appears to be no problem for me to tackle on the issue that the hon. Lady has raised. In those circumstances it would be, to put it mildly, an absurd over-reaction to a debating point that the hon. Lady likes making, for me to use a statutory power that has not been demonstrated to be necessary. The answer to the question, "Where is the power if it is necessary?" is on the face of the 1990 Act.

Ms Harman

First, does the Secretary of State agree that he cannot use his powers under section 10 of the National Health Service and Community Care Act 1990 to restrict the rights that trusts have under schedule 3 of that Act to borrow without his approval?

Secondly, does the Secretary of State agree that the reason why trusts have not borrowed from the private sector hitherto, despite the fact that they have had the power to do so since 1990, is that they have been unable to provide security for those loans because they have been unable to mortgage their assets? The Bill provides that security, and that is why the trusts will start borrowing.

Mr. Dorrell

The hon. Lady is wrong on both points. First, section 10(2) of the 1990 Act says: It shall be the duty of every NHS trust to achieve such financial objectives as may from time to time be set by the Secretary of State with the consent of the Treasury". That is a clear power, which I could use to give EFLs the statutory backing if it were demonstrated to be necessary. The hon. Lady must demonstrate that it is necessary, and she has not done so.

Secondly, the answer to the question, does the Bill provide a basis of guarantee or allow a lender to a trust access to the assets of the trust, is no, it does not; and the bar on the pledging of assets of trusts remains in place because it is in the statute.

I have answered both questions the hon. Lady asked me directly and in the negative. They are irrelevant to the key question that the House must address today, which is not whether the controls are adequate—although I should be very happy to debate that. If the House wants to demonstrate the need for extra controls on NHS trusts, it must be demonstrated that existing controls are inadequate. The hon. Member for Peckham has not done that. Whether the controls are adequate or inadequate does not alter the fact that I believe that NHS trusts and the NHS as an institution should meet the financial obligations that it properly takes on. That is the Bill's only effect.

Mr. Simon Hughes

The Secretary of State has, as yet, left two questions unanswered. The hon. Member for Peckham asked whether he agrees that it is open to trusts to borrow without his approval. The second question, which has not yet been asked, is why the original power in the 1990 Act is a power of discretion—either to pick up the tab or not to pick it up? What reasons was the Secretary of State given by his civil servants for the fact that the Bill, as originally drafted, gave him a discretion that is no longer thought to be appropriate?

Mr. Dorrell

The answer to the second part of the hon. Gentleman's question—I have asked that question myself—rests on the proposition that the same principle was carried forward from the 1977 Act. There are currently not many people advising me on the drafting of the legislation who remember the precise arguments that went on nearly 20 years ago. I have no intention of ever using that discretion, as I have already made clear to the House, which is why I am in favour of getting rid of it.

On the question about the nature of controls on trust borrowing, that is set out in the financial regime of trust financial control. If it were shown that the regime was in some sense flawed and that trusts were not living within the controls set out in this document, I would be the first to argue—as one would expect of a former Treasury Minister—that we need to take effective action to ensure that trusts live within their financial obligations.

Trusts can borrow without my specific consent, but they must first show that they are borrowing in a way in which good value is delivered. The overwhelming scale of trust borrowings—[Interruption.] They do because they have a statutory obligation, which I have read out to the House, to trade in an effective, efficient and economical manner. A trust that borrows expensively when a cheap alternative is available would very quickly and quite properly find itself before the Public Accounts Committee, with its accountable officer sitting beside Mr. Alan Langlands, the accounting officer for the NHS, explaining why it was borrowing expensive money when cheap money was available in the public sector.

The hon. Member for Peckham, however much she may throw up dust and fog around this issue, has failed to obscure the central question of whether the NHS will stand by its liabilities. That is the only question that the House is being asked to decide today. I assure the House that if the trust financial regime is shown to deliver inadequate control on trusts, we shall of course address that inadequacy. I have given that assurance three times now. She has not, however, shown that the trust financial regime is inadequate.

The hon. Lady has spoken to many people on this subject, and I look forward to hearing what she has to say in the debate. If she plans to argue that we need extra controls on trusts' financial obligations, she will have to demonstrate that they are not staying within the existing financial regime, which provides all the controls that could possibly be required.

Mr. William O'Brien (Normanton)

The issue of the trusts is central to the Secretary of State's argument. He has raised the issue of the trust walking away from its responsibilities. As all trusts are approved by the Secretary of State and are responsible to him, will he tell us how a trust will be able to walk away from its liabilities?

Mr. Dorrell

The Bill's purpose is to provide that trusts and the NHS as a body cannot walk away from their liabilities. I do not think that a public sector body should have that freedom, which is why I am proposing to withdraw from the Secretary of State the discretion in the current law to reorganise a trust without providing for its liabilities.

The answer to how much a trust can borrow is the amount set out in its external financing limit.

Ms Harman

It is £5 billion.

Mr. Dorrell

The hon. Lady says that the amount that trusts can borrow is £5 billion. That is perfectly true. The amount that one trust can borrow is set out in its EFL, or in the amount that is provided for in the figure underlying its EFL.

The Bill does not change any of those controls, and no evidence has been produced to suggest that the controls are inadequate. As has already been revealed in this debate, the fact is that the Bill changes—[Laughter.] It changes nothing, because I have not the slightest intention of using the discretion that it removes. Therefore, the Bill will have no practical consequence—unless one believes that the members of a successor Government want to protect for themselves the freedom to walk away from NHS liabilities that have been properly entered into. That is the Bill's only effect and it introduces only that change. It changes nothing unless one believes that a successor Government want the freedom to walk away from NHS liabilities.

The proposals in the Bill cannot be answered by talk about the approvals process, as that would be a red herring. I am quite happy to defend the approvals process, but that is not the question before the House. The question is whether a debt, once entered into by the NHS, should be paid. If we believe that the answer to that question is yes, we should vote in the Aye Lobby at the conclusion of the debate. If we believe that the answer is no—

Mr. Spellar

Will the Secretary of State give way?

Mr. Dorrell

I shall give way in a moment. I have plenty more to say; I am not finished yet.

If the answer to that question is no, we are entering a quite extraordinary world, in which the first element will be a completely new definition of stakeholding. Opposition Front Benchers are now defining for us their belief that, should someone be a creditor of the NHS under Labour, he will no doubt hold a stake in it, but he cannot be sure of being paid. He would be given a piece of paper that was of as much value as a voucher issued by the Tsarist railway system. Opposition Front Benchers want to retain the freedom to walk away—[Interruption.] I am absolutely on my place. They want to retain the freedom to walk away from liabilities, in the manner of a tinpot third-world country, which is exactly the type of behaviour we condemn when it is unearthed in the darker fringes of the corporate sector by investigative journalists.

I should have thought that Opposition Front Benchers would want nothing whatever to do with such a practice. That is the type of shyster trick beloved of smart Aleck lawyers, who pay attention to the small print without recognising the liability that every taxpayer who pays for the NHS wants us properly to respect. Nye Bevan must be turning in his grave at the way in which Opposition Front Benchers are demeaning the name of the service that he established. They want to preserve for themselves the freedom that they condemn in the dark fringes of the corporate sector.

Mr. Spellar


Mr. Dorrell

I have excited the hon. Member for Warley, West (Mr. Spellar), and I give way to him.

Mr. Spellar

The Secretary of State has been slightly confusing. Stripping away all the rhetoric, he has given a very interesting redefinition of risk management and risk assessment in the health service and under the PFI. Is he saying that the PFI will be reckoned as guaranteed by the Department of Health, with no risk to the private sector? How does that affect its relationship to the public sector borrowing requirement?

Mr. Dorrell

I am saying no such thing. All that I am doing is removing from a private sector trader dealing with the health service—whether a PFI partner or the famous potato dealer—the risk that a Secretary of State might walk away from a properly defined liability on the health service. The whole point of the PFI—which I shall address later and which I am sure that the hon. Member for Peckham will want to touch on in her speech—is that it defines a series of risks that do not rest on the health service or the public sector and are therefore not liabilities of the public sector which are dealt with in the Bill. Those risks are taken by the private sector partner—that is the point of the PFI.

The purpose of the Bill is not to address those liabilities and risks, but to address the relationship between every NHS trust and every supplier of goods and services to that trust, such as the PFI contractor and the potato supplier. My belief—I am sure that it is held by all my hon. Friends—is that the NHS should honour its obligations to those people while understanding that they have taken on properly assessed commercial risks in the establishment of that trading relationship with the health service.

Mr. Kevin Hughes

Will the Secretary of State give way?

Mr. Dorrell

No, I must make progress.

I said that Nye Bevan must be turning in his grave at the prospect of the NHS being dealt with in that way. I notice that other, more contemporary people, do not associate themselves with the tactics of the hon. Member for Peckham. The hon. Lady has tabled a reasoned amendment to the Bill, which she believes is exclusively related to the PFI—I do not deny the Bill's relevance to the PFI, but it extends far beyond it. The hon. Lady believes that the Bill relates only to the PFI; I therefore find it passing strange that not one member of the shadow Front-Bench Treasury team was prepared to put his or her name to the reasoned amendment tabled by the hon. Lady.

The shadow Chancellor, the shadow Chief Secretary and the hon. Member for Edinburgh, Central (Mr. Darling) have all been visiting potential PFI partners and trying to sound orthodox. They have been trying to underwrite Labour's respectability in that community. Members of the shadow Front-Bench Treasury team who are touring that circuit will find their hosts choking on their prawn cocktails when they explain to them that they want to preserve the freedom to walk away from private finance liabilities.

The hon. Member for Peckham must answer another question in the context of the debate. She does not merely have to explain why the shadow Treasury Front-Bench team wants nothing to do with the reasoned amendment, but whether she has yet resolved her difficulties with her colleagues on the Opposition Front Bench about their attitude to the PFI. It is not only every potential PFI partner, but everyone working in the health service and every voter who want some clear answers.

Ms Harman

I shall give them.

Mr. Dorrell

I look forward to that as it will be a first.

I shall remind the hon. Lady of where she is coming from in terms of the obscurity of Labour's position on the PFI. On the "Today" programme on 28 November the hon. Lady said that the PFI was a new trick to privatise the Health Service. That was the hon. Lady's line, and it was not just a slip of the tongue. We both attended a public meeting in Birmingham town hall at the beginning of this year and, with my own ears, I heard her say: I don't call it a Private Finance Initiative, I call it a privatisation initiative. The hon. Lady has twice taken that line—she was explicit and specific: she is against the PFI.

The hon. Member for Dulwich (Ms Jowell) used to be a member of Labour's Front-Bench team. She made it clear that the hon. Member for Peckham was not the only one to hold that view. The hon. Member for Dulwich said: The Private Finance Initiative is the Tories' route map to the privatisation of the Health Service. Those views are entirely wrong, but, more interestingly in the context of today's debate, they reveal the position of the shadow health team on the PFI: its members are explicitly and clearly against it.

The hon. Member for Peckham says that the Bill is all to do with the PFI and I am responding to her concerns about that. If the Bill is all about the PFI, the House, in order to consider the Bill, needs to know where the hon. Lady stands on the PFI. We need to hear the hon. Member for Peckham reconcile her position with that of the hon. Member for Rother Valley (Mr. Barron).

While the hon. Member for Peckham says that she is against the PFI and calls it the privatisation initiative, the hon. Member for Rother Valley told the Association of the British Pharmaceutical Industry in January: We do not disagree with the PFI, how could we? It was Labour who first thought of partnerships between the public and private sector. The hon. Lady says that she is against the PFI; the hon. Member for Rother Valley says that he is in favour of it and that it would be inconceivable for the Labour party to oppose it.

At least the hon. Member for Rother Valley has the leader of the Labour party on his side. The leader of the Labour party was explicit about the PFI and health when he said at the party's conference in 1994—

Mr. Milburn

We have heard this old story before.

Mr. Dorrell

The hon. Gentleman says that it was a long time ago—it was 17 months ago. Are we to believe that the Labour party has changed its position on the subject in 17 months? Are we to believe that the leader of the Labour party goes to his party conference and sets out his stall and, 17 months later, a member of the Labour party's Front-Bench team says, "That was all 17 months ago"?

Seventeen months ago the leader of the Labour party said: We would get public and private finance working together in transport, in housing, in capital projects in health and education.

Ms Harman


Mr. Dorrell

The hon. Lady says yes—public and private finance will work together in health and education. I look forward to hearing the hon. Lady explain to the House how she anticipates getting public and private finance to work together while defending the proposition that the NHS must be free to walk away from its debts. Those propositions make strange bedfellows and I look forward to hearing the hon. Lady's explanation.

As well as making that statement at the Labour party conference, in the Budget debate in the autumn of 1995, the leader of the Labour party was once again explicit when he said: The PFI is right in principle."—[Official Report, 28 November 1995: Vol. 267, c. 1077.] We need the Opposition Front-Bench team to tell us their policy on the PFI in the health service. Does the Labour party believe that it is a privatisation initiative? If it does and it can demonstrate that, I imagine that most hon. Members would make common cause against it. It is because I do not believe that it is a privatisation initiative, but believe that it reinforces the delivery of high quality public health, that I am a strong supporter of the PFI. In that, I enjoy the support of the hon. Member for Rother Valley and the right hon. Member for Sedgefield (Mr. Blair), but I do not enjoy the support of the holder of the shadow health brief, the hon. Member for Peckham. I look forward to hearing how the hon. Lady reconciles those positions.

Mr. Jacques Arnold (Gravesham)

Does my right hon. Friend realise that my constituents do not consider the PFI as a privatisation initiative, but see it as a massive opportunity for a new district general hospital? The hon. Member for Peckham (Ms Harman) does not have the support of Gravesham Labour party, which has been deafening in its silence on the subject because it supports the PFI as a great hope for the future.

Mr. Dorrell

I entirely agree with my hon. Friend, who speaks for his own constituents, who rightly see the PFI as the best way of delivering—not just to his constituents—more than 25 other big projects in the health service. They are currently being assessed and some of them have already been approved—25 projects costing £25 million or more are all going ahead under the PFI. Three of them have been given the go-ahead already. At Budget time I announced that we were taking the PFI up a gear and would be assessing all the projects coming through the system. I anticipated that the go-ahead for those projects would be announced at the rate of about one a month. That was three months ago and so far we have approved three projects. I regard that as delivering almost precisely on the prediction that I gave at the time of the Budget.

Mr. Martlew

About 18 months ago the second stage of the Cumberland infirmary in my constituency was ready to go to tender, but it was stopped because of the private finance initiative. My constituents are suffering as a result of the PFI, which is simply a delaying tactic designed to save the Government some money.

Mr. Dorrell

Anyone who believes that the PFI—which offers the possibility of investing in health service capital stock without any need for Treasury authorisation or queuing for rationed capital within the context of conventional public sector capital planning processes—is a delaying tactic with regard to NHS capital investment is living in a different world from the one in which I have lived all my adult life. The hon. Gentleman knows that the project in his constituency is being assessed, together with 25 others. He knows also that the Government have increased publicly funded capital investment in the health service by nearly 70 per cent. in real terms, whereas Labour cut it by 30 per cent.

Despite the increased pace of capital investment in the health service, 10 big projects have gone ahead in the past 10 years—that is roughly one a year. Since the programme was launched on a higher plane at the time of the last Budget, we have been announcing projects at a rate of one a month. Exchanging a system that approved projects at the rate of one a year for a system that is currently approving them at the rate of one per month seems a significant improvement—[Interruption.]

Mr. Deputy Speaker

Order. There are far too many sedentary interventions—not least from the Opposition Front Bench.

Mr. Dorrell

To move from one project a year to one a month is, by anyone's definition, a significant increase in the health service's capital investment programme.

Mr. Rhodri Morgan (Cardiff, West)

Name them.

Mr. Dorrell

I shall name three schemes for which I have announced the go-ahead: the South Buckinghamshire NHS trust, St. James's in Leeds and the Royal Berkshire and Battle hospitals NHS trust. They have received the go-ahead since the Budget.

Mr. Gunnell

Will the Secretary of State make it clear that, in talking about the "go-ahead", he is referring to a go-ahead on the planning stage? Does he concede that the contract has not been signed in Leeds? We are led to believe that it will be the first contract signed, which means that the initiative has not yet provided anything on the ground: all the projects are still at the planning stage.

Mr. Dorrell

The hon. Gentleman is wrong about the initiative's not having provided anything on the ground. I have referred to 48 smaller schemes and £225 million which has been provided under the private finance initiative. It is true that none of the three big schemes that I announced since the Budget has been signed. At the time, I would have been amazed to hear that the contracts would be signed within three months. It is an absurd idea that one can sign the contract for a £38 million or £40 million scheme—sketch it out on the back of an envelope and sign all the documentation—within a week. Anyone who believes that has never met a lawyer.

Labour Members live in a totally surreal world. We announced the go-ahead for one scheme in December and for the other two in January. It is totally absurd to suggest that I should come to the House with a great pile of contractual documents six weeks after the announcement of intent.

If the House is to address the issue seriously this afternoon, it must recognise that the health service faces a huge task in ensuring that it puts in place all the capital stock that can be used to deliver high-quality health care into the next century. The Leader of the Opposition and the hon. Member for Rother Valley (Mr. Barron) recognise that fact, but apparently the hon. Member for Peckham does not. Today she has the opportunity to emerge from the shadows and to make two things clear to the House and to the country: first, that she believes that the NHS should pay its debts; and, secondly, that she favours the kind of public-private partnership that has been espoused by her hon. Friend the Member for Rother Valley and by her right hon. Friend the Leader of the Opposition and which is being carried forward by the Government. The time has come for her to respond to those two simple points.

Mr. Simon Hughes

On a point of order, Mr. Deputy Speaker. I do not know whether it is the fault of the amplifying system or the Secretary of State, but we should not have to listen to his shouting in future debates. It is a serious point: whatever the merits of his argument, the Secretary of State shouted at us for almost 50 minutes. Perhaps the amplifier volume could be turned down so that we are not blasted out of the Chamber.

Mr. Deputy Speaker

That is not a serious point of order.

5.35 pm
Ms Harriet Harman (Peckham)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to the National Health Service (Residual Liabilities) Bill because it does not include safeguards against government abuse of the Private Finance Initiative to advance privatisation of the NHS with damaging effects on patients and staff; gives an open-ended commitment on the part of the taxpayer to honour the liabilities of NHS Trusts irrespective of the manner in which they have accrued; and fails to ensure government appraisal and control of potential liabilities or their adequate scrutiny by Parliament. This is a short Bill, but, if passed by the House, it will have long-lasting consequences for the national health service. The legislation raises five key points. First, it shows that the Government's promises about hospital building are set to be broken. Up and down the country, new hospitals promised by the Government are no more than castles in the air. The Secretary of State said that he is moving the programme to a higher plane—it is not merely a higher plane: it is in outer space. It is not about hospitals on the ground, but castles in the air.

Secondly, the Bill exposes the private finance initiative as a Trojan horse for privatisation. Thirdly, it offers a blank cheque of up to £5 billion from the public purse as the price of baling out the shambles of the Tories' private finance initiative. Fourthly, it ends the role of the Secretary of State in prioritising and agreeing our hospital building programme. The Secretary of State looks puzzled about that. When people read the Treasury Select Committee minutes they will understand why he is puzzled: he is slightly behind the game. When he appeared before the Treasury Select Committee he did not know that trusts have the power to borrow. The Secretary of State still looks puzzled. In the course of my speech, I shall help him to understand the unintended consequences that the Bill will have for him and for any future Secretary of State.

Fifthly, the presentation of the Bill raises serious questions about the Secretary of State's competence to run the health service or to look after public money. The problem that the Bill tries—and fails—to sort out began in 1990 when the Tories turned NHS hospitals into trusts. They made them independent and freestanding from Government and gave them the power to borrow. Because of the independence afforded by the National Health Service and Community Care Act 1990, the Secretary of State had the discretion only to take over the "assets, rights and liabilities" of trusts in the event of their "dissolution". He did not have to take over their liabilities. It is quite wrong to suggest that the parliamentary draftspeople were dozing and included provisions in the 1990 Act simply because they existed already.

Under this Bill, the Secretary of State will be compelled to take over the liabilities of NHS bodies in the event of their "ceasing to exist". So he must stand behind trusts' borrowings, but he does not have any power over how much they borrow, which trusts do the borrowing and why they borrow. That is why we oppose the Bill. The effect of the legislation, considered in conjunction with the rights of trusts as stated in the 1990 Act, is to give a blank cheque to independent trust hospitals. The Secretary of State will have to underwrite any liabilities that are incurred, even though he has no control over how they are incurred. By his own hand—pushed by the bankers, of course—the Secretary of State will have the worst of all worlds—responsibility without power.

The reason why the Secretary of State rushed the Bill into Parliament without properly thinking it through has nothing to do with the potato traders. All his talk about traders is disingenuous. When he says traders, he means bankers. The Secretary of State rushed the Bill into Parliament without properly thinking it through because he is a desperate man.

The Secretary of State's private finance initiative policy for new hospital building is a shambles. The Government have made themselves completely dependent on private finance for hospital building. They have slashed the public funds for NHS capital projects. The Budget cut the NHS capital programme by 17 per cent. in just one year. The Secretary of State promised that the gap would be filled by using private money—magic money—and that he would use his Treasury acumen to bring it in. Even if he delivers everything that he promised on the PFI—a total of £135 million next year—that is less than half what he has cut from the NHS capital programme.

Mr. Jacques Arnold

Will the hon. Lady give way?

Ms Harman

In a moment.

In their speeches and the briefings that appeared in the press, the Secretary of State and the Chancellor of the Exchequer gave the strong impression that building was about to begin on PFI-based new hospital contracts. New hospitals have been trumpeted for Norwich, Carlisle, Amersham and Swindon. [Interruption.] The Secretary of State now says that is absolutely untrue. Is he telling the House that it will not happen?

Mr. Dorrell

The hon. Lady draws no distinction between Amersham, where I have made an announcement that the hospital is to go ahead, and Norwich and Carlisle, where the projects are still subject to assessment. If we are still assessing the projects, how can I possibly say that they will go ahead? I have never said—nor would I say—that decisions have been made to go ahead with those projects. We have decided to go ahead with three hospitals since Budget day and I listed them in the House this afternoon. The others are subject to assessment, as the hon. Lady and the House would expect.

Ms Harman

I cannot answer for anything that the Secretary of State might say. I simply refer to his speech to the Royal College of Physicians on 21 November. If he is telling people in Norwich, Carlisle, Amersham, Swindon, north Durham and Bishop Auckland that they cannot expect the hospitals that he promised, we want some clarity on that. The Secretary of State trumpeted them as his six flagship hospitals, first on the front page of The Independent on 30 May 1995, secondly, in the Health Service Journal on 5 October 1995 and, thirdly, in The Independent on 27 November 1995. In his speech to the Royal College of Physicians on 21 November, the Secretary of State said: Over the next few months … we shall see a regular flow of new projects", but it seems to be a flow of projects for paperwork in the Department of Health, not for building work on new hospitals.

What is the real position? Just last week, the Secretary of State was asked by the Treasury Select Committee whether any PFI contracts had actually been signed. The answer was no. None of the deals for the new hospitals has been signed. We have to watch him when he says that they have been agreed or given the go ahead. My hon. Friend the Member for Morley and Leeds, South (Mr.. Gunnell) was absolutely right about that.

The Secretary of State says that he has agreed contracts, but he is not paying for them. The local hospital trust has agreed them, but it is not paying for them. The people who are supposed to be paying for them—the banks—have not agreed them, so now he is backpedalling fast and no contracts have been signed. [Interruption.] Hon. Members say that he is not. They should have seen him on the Select Committee, when he said that he was trying to play them down. He is playing them down now because he is in deep trouble as the PFI is a shambles. The Secretary of State told the Treasury Select Committee that he could not say when the contracts will be signed. Now he is trying to play them down, but his promises to people throughout the country are set to be broken.

The Secretary of State follows a common pattern with each of the six flagship hospitals. First, he announces a new hospital, then there is a delay because the project has to be referred to get private finance, then a private finance initiative proposal emerges, but it involves far fewer beds than there are now or than were originally planned and finally, there is nothing—no contract is signed and no work begins. It is the same story up and down the country.

Mr. Henry McLeish (Fife, Central)

It is fantasy finance.

Ms Harman

As my hon. Friend says, it is fantasy finance. Let us look at each of the flagship hospitals. The first is Norwich and Norfolk district general hospital.

Mr. Jacques Arnold

Will the hon. Lady give way?

Ms Harman

I shall give way when I have dealt with the six flagship hospitals. I shall also deal with the hon. Gentleman's hospital because the Secretary of State will not tell him when it will be started.

Let me quote from a Department of Health press release about the Norfolk and Norwich hospital. The Secretary of State is screwing up his eyes to read it. Let me read it to him. It is headed: Go-ahead for new £100 million hospital in Norwich". The only problem is that it is dated 1990. There has been plenty of time to write on the back of envelopes, but no hospital has been built. In the press statement, the then Secretary of State for Health, who is now Chancellor of the Exchequer, confidently told local people: Construction for the new hospital is expected to start in 1992"— but it did not. Six years after the first announcement, there is still no hospital. No contract has been signed and the people of Norwich are still waiting for their new hospital. When will they get it?

Mr. Dorrell

I was a junior Health Minister in 1990. I was responsible for what was rather quaintly called unconventional finance. Since then, the rules for the use of private capital within the health service have been changed, as the Opposition often argued should happen, and have moved in the direction for which the Opposition argued. The hon. Lady should welcome the fact that an announcement made six years ago is now a great deal closer to fruition.

Ms Harman

The Secretary of State said that he was Minister for unconventional finance. He is now Secretary of State for unconventional finance and where is it?

It is the same story in Carlisle. Plans for a new hospital were developed as long ago as 1989. By summer 1994, the trust had finalised and submitted its plans. Carlisle Hospitals NHS trust reached the stage of signing a contract with the public sector two years ago, but it had to be stopped when the Government required the project to get private finance. Again, although the plan was first mooted in 1989, no contract has yet been signed and the people of Carlisle are still waiting for their new hospital.

It is the same story in Amersham. The plan to develop Amersham and Wycombe hospitals was approved in October 1994. Then the Tories changed the rules and said that any new hospital required private finance. No contract has been signed and no building has been started. The people of Amersham are still waiting for their new hospital.

It is the same in Swindon. The Secretary of State gave approval for a replacement for the Princess Margaret hospital in December 1993. He gave it what would now be described as the go-ahead, but in October 1994 the project was required to get private finance. No contract has been signed and the people of Swindon are still waiting for their hospital.

In north Durham, the Department of Health agreed plans with North Durham Acute NHS trust for a new district general hospital in January 1994. Then the Department said, "Sorry, but none of that is going forward. You must obtain private finance." No contract has been signed and the people of Durham are still waiting for their hospital.

Mr. Gerry Steinberg (City of Durham)

I have a letter from North Durham Acute hospital trust saying that it will now consider two private sector bids for financing. That letter promises that the first phase of a new hospital will be built by 1999. My hon. Friend's remarks are deeply worrying. I will be meeting the trust's chief executive, Colin Douglas, on Friday. Does my hon. Friend advise me to tell Mr. Douglas that he ought to look elsewhere for finance and not depend on the private sector because the Government will not give their permission?

Ms Harman

The problem is that if the trust looks to the public sector, it will find that Government finance for hospital building has been slashed. If the trust looks to the private sector, it will discover a whole load of bankers saying, "Health service PFI does not add up under this Government." My hon. Friend illustrates the situation well. Durham is the location of supposedly one of the programme's flagship hospitals, yet the terms of the contract have not even been agreed with the parties who are to design, finance and build that hospital—let alone the matter of getting the money from the banks.

Plans for rebuilding Bishop Auckland hospital have been in the pipeline since 1988. In 1993, local Members of Parliament received assurances from the now chair of the Tory party, then Minister of State in the Department of Health, that a new hospital would be built. In 1994, the Chancellor announced that the hospital would have to secure private finance. Again, no contract has been signed and the people of Bishop Auckland are still waiting for their hospital. The Tories' new hospital building programme is a cruel hoax—nothing more than the launching and relaunching of six flagship hospital projects, none of them built. The flow of announcements increases, but the building of new hospitals fails to materialise. The hopes of local people are raised, then dashed.

Where does that leave the Secretary of State? In the PFI process, the right hon. Gentleman has shown himself incompetent. He makes promises, trumpets them on the front pages of newspapers, and then discovers that he cannot deliver because the bankers will not sign the cheques. The whole thing is a shambles. The Secretary of State was so keen to air dogma that he overlooked the detail, which has nothing to do with potato traders. The private sector will not sign contracts involving tens of millions of pounds under current law, and it is easy to understand why. The private sector must have a contract with the trust, which is the private sector partner. Under the National Health Service and Community Care Act 1990, the Secretary of State can abolish a trust and does not have to pick up its liabilities. Any banker would be unwise to enter into a contract valued at hundreds of millions of pounds with a public sector partner that can be abolished by the Secretary of State—so the bankers will not sign. The Secretary of State did not notice that fact before announcing the PFI and cutting public sector funds, but the bankers drew it to his attention.

Because the bankers will not sign, the Secretary of State has rushed this new Bill into the House, telling us that it is about potatoes. Although the Secretary of State taking over all the debts will sort out the problems for the private sector, the Bill will create impossible problems for the public sector. The trusts retain the independent status that they were given under the 1990 Act. The Secretary of State has no powers of control over them and underwrites all their liabilities in the Bill. He is making a blanket agreement to stand behind liabilities over which he has no statutory control. The Secretary of State is abolishing any control over or accountability for major areas of NHS capital funding. He is offering the banks a blank cheque from the taxpayer, and he tells the House that that is a mere technicality. Why should the public purse pay for NHS trust liabilities if the public have not played a part in agreeing to those liabilities? The Bill will make it impossible for the Government to oversee the £5 billion of borrowing allowed in schedule 3, which will end up as public expenditure.

Last week, the Treasury Select Committee took evidence from the Secretary of State for Health and asked him about PFI. Fortunately I was present to hear the right hon. Gentleman's replies. I pay tribute to the skilful questioning of my hon. Friends the Members for Hackney, North and Stoke Newington (Ms Abbott), for Hackney, South and Shoreditch (Mr. Sedgemore), for Newham, North-East (Mr. Timms) and for Sheffield, Attercliffe (Mr. Betts). They asked the Secretary of State about the implications of the Bill. Let us consider the right hon. Gentleman's replies.

Mr. Jacques Arnold

Surely the hon. Lady will give way now?

Ms Harman

I will give way to the hon. Gentleman when I reach the point in my speech about which he is asking, but I have not reached it yet.

The Select Committee asked why the Bill is needed now. The Secretary of State replied that the Bill remedies a problem that has existed since 1948. In fact, the problem has arisen only since the 1990 Act, which established trusts as independent. Before, they were an integral part of the NHS and their actions were controlled by and accountable to the Secretary of State. The right hon. Gentleman has not just stumbled across a problem that has been invisible for almost 50 years, but he created the situation. He was a Minister in the Department when trusts were made freestanding in 1990.

The Select Committee asked what controls exist over trust borrowing. As that question was put, the Secretary of State rudely interrupted and said that trusts do not have the power to borrow—he denied that trusts have the power to borrow. He had not read the 1990 Act. Even though the right hon. Gentleman served on the Committee that considered that legislation, was a Minister in the Department of Health and is now presenting a Bill to guarantee trust liabilities, he had not asked himself whether trusts can borrow and whether he has any control over them. The Secretary of State asserted that trusts do not have the power to borrow, not knowing that they have to borrow. That is a spectacular admission of ignorance, particularly as the Bill requires the right hon. Gentleman and any future Secretary of State for Health to stand behind liabilities accrued by borrowing trusts.

In case the Secretary of State still has not grasped the point, I refer him to schedule 3 to the 1990 Act, under which NHS trusts can borrow—forget about section 10, which does not override schedule 3. The only restrictions are that trusts should not mortgage their assets, borrow foreign currency or together borrow more than £5 billion. Trusts can borrow without the Secretary of State' approval. They do not have to tell him that they are borrowing—they do not even have to notify him. It is all the more extraordinary that the Secretary of State had forgotten—perhaps he never knew—that trusts have borrowing powers, given that my hon. Friends and I have asked parliamentary questions about that aspect.

Last December, my hon. Friend the Member for Darlington (Mr. Milburn) asked the Secretary of State how many national health service trusts had borrowed money from commercial sources. The answer was Information on national health service trusts' borrowing from commercial sources during the year is not available".—[Official Report, 4 December 1995; Vol. 268, c. 35.] The trusts have the power to borrow, but they do not have to tell the Secretary of State.

We all know that the trusts have not borrowed much in the past six years. They have not been able to borrow because they have not had security for the loans and they cannot mortgage their assets. But the Bill would give them blanket security for all loans. Under the 1990 Act, they will be able to borrow up to £5 billion. The Secretary of State wants to rush the Bill through the House and press on with the PFI, not only to save himself the embarrassment of all the broken promises of new hospitals that have not materialised, but because, under the Tories, the PFI in the NHS is a Government ramp for privatisation.

Under the Tories, the PFI is not a public-private partnership, but the private sector cherry-picking deals. Under the Tories, the PFI is not private finance working in the public interest, but private commercial interests driving into the heart of the NHS. Market testing is already threatening to privatise clinical support services. The PFI is set to accelerate that yet faster and will let the private sector take over not only the design, building, financing and operation of hospitals, but the running of clinical services.

The Secretary of State says that he will not let clinical services be put out to the private sector—with a qualification—without the consent of local clinicians. That reassurance means nothing because the Secretary of State will not define what he means by clinical services and nor will he identify any mechanisms for establishing the consent or otherwise of local clinicians. Presumably, he means that if anyone applies for a job when it is advertised by the private sector, that will signify the support of local clinicians. It is no surprise that the Secretary of State does not want to be specific, because he knows that the medical profession and all those who work in the health service are wholly opposed to privatisation, especially the privatisation of clinical services.

The PFI is already set to create the first privatised NHS hospital, in Stonehaven in Scotland. The design, building and management of a new hospital, including the delivery of clinical services, will be put out to tender to private sector bidders. When the private sector is designing, building, financing, operating and running the hospital, and employing the doctors and nurses, that is privatisation and that is what the Government are all about.

The Secretary of State has asked about our position. Our position is perfectly clear, but the Secretary of State must try to distinguish between our criticisms of what he is doing and our plans for what we would do. We have made it clear that when private finance can work in partnership with public finance in the public interest to secure investment, we welcome it. We have led the way—across the whole range of services, and especially transport—in realising that private finance can work in the public interest, but we have always been clear that our health service must be run by the NHS and that private finance must be in partnership with public finance, not a substitute for it. The public sector, not the private sector, must set priorities in the public interest.

We believe that the Tories are using the PFI in health as a back door to privatisation. This debate raises serious questions about whether people will get their much-needed hospitals.

Mr. Jacques Arnold

On a point of order, Madam Deputy Speaker. On several occasions, the hon. Lady has said that she would give way to me in a moment. Could you, Madam Deputy Speaker, tell us what a parliamentary moment is, as I fear she has not the guts to give way?

Madam Deputy Speaker (Dame Janet Fookes)

Order. Whether an hon. Member gives way is not a matter for the Chair.

Ms Harman

I have just remembered that every time I have given way to the hon. Gentleman previously, he has asked me questions that had nothing to do with the issue that we were debating. I reminded myself not to waste my time, or that of the House, by answering his questions.

The Bill also raises serious questions about public services and public accountability, because the Tories are not hostile to public spending. They are hostile to public services. When it comes to the chance to privatise and subsidise the private sector, money is no object. The Tories are not prudent with the public purse, they are reckless with it. That is what the Bill is about. For the sake of our public services and the accountability of the public purse, I call on the House to decline to give the Bill a Second Reading and to support our amendment.

6.4 pm

Mr. David Lidington (Aylesbury)

We have been treated to a speech of quite stunning disingenuousness by the hon. Member for Peckham (Ms Harman). We have heard a series of criticisms of the private finance initiative, which is now beginning to deliver benefits to my constituents and those of other right hon. and hon. Members, but we have heard not one scrap of detail about how the Opposition propose to alter the rules of the PFI to bring about the remedies that they claim are now needed. We have seen a rather feeble attempt to gloss over the differences between the hon. Lady, with her avowed hostility to the whole concept of the private finance initiative, and her deputy, the hon. Member for Rother Valley (Mr. Barron), who—rather than decry the PFI—wishes to claim authorship of it for himself and for his party.

Mr. Bob Dunn (Dartford)

Surely the differences are not just between hon. Members on the Front Bench but between the hon. Member for Peckham and the local Labour parties in Dartford and Gravesham, which fully support the private finance initiative in the construction of a new hospital on the Darenth Park site. The hon. Lady must know that because she has made inquiries, but she has not raised that point today. That tells me that she knows that there are no votes in the line that she is taking in the constituency of Dartford.

Mr. Lidington

My hon. Friend makes his point well.

We also heard a series of criticisms from the hon. Member for Peckham of the reduction in planned tax finance capital expenditure on the NHS in the plans published in the Budget for the financial year 1996–97. We did not, of course, hear that, even at that reduced level, capital spending on the NHS in the next financial year would still be some 50 per cent. higher than the level that the Conservative party inherited from the Labour party when we took office in 1979.

I listened very carefully to the hon. Lady's speech and I noticed that, once again, while she criticised the Government for alleged parsimony in the capital funding of public services, she was careful to make no commitment on the part of herself, her Front-Bench team or her party to increase by one penny, let alone by the billions of pounds which she claims are needed, the amount that a putative Labour Government would be prepared to spend on the NHS. The Opposition are prepared to talk in a way that encourages expectations, but again and again they refuse to spell out the cost and how it would be met.

Dame Elaine Kellett-Bowman

Is that not exactly what the disabled persons thought when they went to Labour party headquarters? The Labour party does a lot of talking, but it does not give much commitment.

Mr. Lidington

My hon. Friend puts her points in as forceful and telling a manner as usual.

Nor would one guess from listening to the hon. Member for Peckham that capital projects under the traditional Treasury route have often been subject to prolonged delay and change stretching over many years. That applies to hospitals, roads and railway projects. It is inherent in capital spending, which is dependent on Treasury finance, that it becomes subject to the exigencies of overall Government priorities for public spending. The fate of individual projects can depend on the horse trading that takes place each year between spending Departments and the Treasury on which area of the Government's overall programme should get priority for that financial year.

I want to talk briefly about the project that I know best—the one approved for the South Buckinghamshire NHS trust Amersham and High Wycombe hospitals. Although they are located just outside my constituency, they serve a great many of my constituents as well as those of my hon. Friends the Members for Wycombe (Mr. Whitney), for Beaconsfield (Mr. Smith) and for Chesham and Amersham (Mrs. Gillan).

As the hon. Member for Peckham pointed out, the South Buckinghamshire NHS trust was putting together proposals for a major capital building programme before the latest private finance initiative was launched. The project, approved in the Budget statement last year, will deliver new hospital facilities much more quickly than local people had dreamt was possible, had they had to take their turn in the queue at the Treasury door, via the traditional funding route. Moreover, the design of the new buildings, and their location, not to mention the way the various facilities will be distributed between the two sites at Amersham and Wycombe, will deliver higher-quality clinical services than would have been achieved under the plans originally drafted by local management using the traditional Treasury funding route. It is clear to me from my recent talks with local trust managers and clinicians that they unanimously welcome the PFI, as hastening the prospect of top-quality hospital facilities for local people.

We have heard Labour party criticism of the alleged laxity of financial controls in the NHS—the alleged risk of money matters going wrong. Having looked at the projects planned in Buckinghamshire, I find it difficult to understand how anyone could believe that. I have seen the proposals for new buildings crawled over, first by the trusts and their advisers, then by the regional health authority, then by the NHS executive, then by the Department of Health and Treasury officials—all to make sure that the right safeguards are in place and that the outcome will be good NHS provision to suit the needs of local people, at a price that will deliver value for money to the taxpayer.

As the PFI progresses, there are still some difficulties to be resolved. It is a new procedure, and I am sure that Ministers will want to learn from experience of the first projects so as to be able to improve procedures as the initiative takes hold and gathers pace.

I should like to direct the Under-Secretary's attention to two points in particular. First, I hope that Ministers will always be alert to the need to avoid detailed discussions getting bogged down in the sort of Treasury-Whitehall theology that has delayed projects in the past. As an example, I offer the distinction between a finance lease and an operating lease. A finance lease amounts to providing borrowing to pay for an asset, and that would count within the public sector borrowing requirement. An operating lease is defined as a payment for a service which may include the acquisition of a building and it does not count in the PSBR. I hope that we can avoid lengthy arguments between groups of accountants in various public bodies; such disputes can slow down the attainment of an objective on which everyone is fundamentally agreed.

Secondly, I hope that my right hon. and hon. Friends will look closely at hospital trusts that may want to apply through the PFI for funding for construction—and perhaps maintenance—of buildings, but not necessarily for the management of facilities also. It will be precisely the hospital trusts that have made the greatest progress towards contracting out many of their ancillary services which may find it more difficult to let a single contract to a PFI partner for the management of those services in future.

I am certain that my right hon. and hon. Friends will try to learn from experience. I am also sure that this initiative bodes well for my constituents and for those of many other hon. Members. I wish the policy and the Bill well.

6.14 pm
Mr. Brian Sedgemore (Hackney, South and Shoreditch)

When I heard the Secretary of State speaking, I was reminded of the questions that Tony Hancock asked himself shortly before he committed suicide: "What does it all mean? Why I am here? Where are we going?" He answered the questions as follows: "I don't know. I don't know. I don't know." The Secretary of State spoke for 50 minutes, telling us that this Bill changed nothing. I should hate to listen to him moving the Second Reading of a Bill that did change something.

Let us imagine the scene. It is Tuesday 27 February, late evening. The shadow Secretary of State for Health is at home after a hard day. She is lost in reverie; suddenly her whole world looks like crashing in—the telephone rings. There is a man on the other end of the line. His voice is cracking and he seems close to tears. It is the Secretary of State for Health. He says, "Harriet, I'm in trouble—you've got to help me. You're my friend, aren't you?"

The Secretary of State then pulls himself together and explains that he is being blackmailed by a bunch of bankers—three times tonight he used the term, a bunch of "shysters". They are, it seems, blackmailing him into passing the Bill as part of a wider negotiating package. They are telling him, "We are business men, not risk takers." There is panic in the right hon. Gentleman's voice. He says that the Bill is to be published tomorrow, and that Second Reading must be on 5 March—last Tuesday. The Bill must be through the House by Whitsun.

The shadow Secretary of State for Health stands firm, however, and is not seduced by the blandishments of a Secretary of State who is clearly trying to con her over the telephone in the middle of the night. Some people may think this story apocryphal; it tells the House what the Bill is all about.

Then, on 4 March, the Secretary of State for Health comes before the Treasury Select Committee to be questioned about the Bill and the private finance initiative. He is usually elegant and composed, but last week he look frazzled—he had obviously had a sleepless weekend. He told us that the bankers still would not sign the PFIs, and that they wanted the Bill, together with other negotiated settlements that present hurdles which he still cannot get around.

The questioning has scarcely begun when this suave, assured, sophisticated Secretary of State suddenly loses control. I know, because I was there asking him the questions. I have the transcript with me. My question, directly related to the Bill, was about the power of trusts to borrow and about how liabilities that the Secretary of State has to meet can be built up. I asked: Can you tell me, the trusts have the power to borrow, do they not? The Secretary of State replied: No, that is incorrect. At that point, it was as though an electric charge had gone through the Select Committee. Everyone sat bolt upright in utter amazement. I was gobsmacked, to borrow a phrase usually used by the Governor of Hong Kong. Perhaps the right hon. Gentleman had misheard the question. So, with incredulity tinged with sarcasm, I repeated it: The trusts do not have the power to borrow? The Secretary of State replied: The trusts do not have the power to borrow. I am absolutely amazed by that double assertion on the part of the Secretary of State. I have in front of me a copy of the National Health Service and Community Care Act 1990. Under the heading "Borrowing", paragraph 1 of schedule 3, on the financial provisions relating to NHS trusts, states: (1) Subject to the provisions of this paragraph and to any limit imposed under the following provisions of this Schedule, for the purpose of its functions an NHS trust may borrow (both temporarily, by way of overdraft, and longer term) from the Secretary of State or any other person. The Secretary of State said twice in succession that NHS trusts had no powers to borrow. We have a Secretary of State who does not know what is in his own legislation, who does not understand how trusts operate, who does not understand how schemes are paid for and how liabilities, which he will guarantee in the Bill, are built up. That is astonishing. It is incredible. By any standards, it is extraordinary.

I have been a civil servant, a parliamentary private secretary—a bit of a dogsbody—and a Member of the House. I have seen Secretaries of State who are ignorant. I have seen Secretaries of State who are very ignorant, but never before have I seen a Secretary of State whose ignorance measures force 12 on the Richter scale. That is hurricane-level ignorance. The Secretary of State's behaviour seemed a bit like that of an A-level student about to take his English examination who does not know his ABC. It was a bit like a plumber walking into a house to mend a cistern and saying that he had forgotten his tools. These were basic facts that we would expect a Minister to know.

I wonder what the civil servants who were at that meeting thought about it. When I was in the civil service, we expected our Secretary of State to go to the Dispatch Box and put on a good performance. We expected our Secretary of State to go to a Committee upstairs properly briefed with all the answers. After all, there were hundreds of us providing the Secretary of State with every single bit of information. A triumph for the Secretary of State was a triumph for us, and a failure by the Secretary of State was a failure for us. As the Secretary of State displayed this astonishing ignorance, he debased and demeaned not only his civil servants and his office but the Department for which he worked.

It is worse than that. I asked how much trusts could borrow, and how great, by way of borrowing, were the liabilities that he was prepared to undertake under the Bill. Because he does not know that a trust can borrow, I imagine that his answer is "None." Paragraph 3 of schedule 3, on limits of indebtedness in relation to trusts, which the Secretary of State thinks cannot borrow anything, reads: (1) The aggregate of all sums borrowed by NHS trusts established to assume responsibility for the ownership and management of, or to provide and manage, hospitals or other establishments or facilities which are situated in England"— only England— shall not exceed £5,000 million or such other sum not exceeding £10,000 million as may be specified by order made by the Secretary of State with the consent of the Treasury. This Secretary of State, apparently, is prepared to allow trusts to borrow £10 billion under his own directions without knowing what it is about. That is why there are people like me—people who have fiduciary and fiscal probity—on the Treasury Select Committee. I have seen whole Governments collapse because they borrowed £10 billion more than they should have. Yet this whiz kid, who used to work for the Treasury, goes to the Department of Health and is prepared to see trusts borrow £10 billion and know absolutely nothing about it. What on earth is happening to our country? Is it any wonder that we are a backward, fractious island off the coast of north-west Europe, with a culture that is in irreversible decline?

Why is the Secretary of State so ignorant? My hon. Friend the Member for Peckham asked that question. One answer to that is that ignorance is quite often born of arrogance and laziness. That reminds me a ditty by Cole Porter:

  • "It's not 'cause I shouldn't
  • It's not 'cause I wouldn't
  • And you know it's not 'cause I couldn't
  • It's simply because I'm the laziest man in town."
To be fair, the Secretary of State may not be the laziest man in town, but everybody in the House now knows that he is the laziest Secretary of State in Whitehall. He has made indolence an art form. If Marlowe was right when he said, there is no sin but ignorance", one of the biggest sinners in the world would be the Secretary of State for Health.

The point that I want to make is that the Secretary of State continued to say that nothing could ever go wrong, that no trust would ever get to a situation where it might have many liabilities to meet, and in any case he would honour them however and wheresoever they had been caused. I shall give one example of the problems that we might face. It relates to the PFI of the Royal Hospitals NHS trust. The PFI is six, seven, eight, nine or 10 times bigger than anything that has been mentioned tonight; it is for £260 million to close St. Bartholomew's hospital and build a new 750-bed hospital in Whitechapel.

It is generally agreed that the private finance initiative is flawed, and therefore that there could be liabilities after this huge sum of money has been invested. How do I know that it is flawed? First, one of the senior figures at the East London and City health authority—the purchaser—told one of the members of the Treasury Select Committee, and I put this to one of our witnesses at the hearing, that the project was not financially viable. That is the kind of thing that my hon. Friend the Member for Peckham is saying. If someone puts in £260 million and the project is not financially available and the trust goes bust, who will pick up the tab? The Bill says that it will not be the contractors and the people who will build and manage the hospital.

We do not need simply to take the evidence of a senior figure who works for the purchaser. The financial viability was question by the York Economics Consortium, which consists of some of the most prestigious health experts in the country. It said, when expressing doubts about the capital and revenue estimates of the PFI, which will probably have to be bailed out by the Bill: The preferred option generates an additional saving of £9m at the cost of almost £100m in additional capital spending. For this additional capital cost to be justified, the revenue benefits of the incremental spend must be reasonably secure.

We believe that there is sufficient uncertainty around the estimates of net revenue savings … that the magnitude of the assumed difference in costs between the options is extremely sensitive. Since this difference is, in any case, relatively small in relation to the total revenue expenditure of the Trust … further evidence is needed before the additional capital expenditure of £100m required to move from a do minimum to a single site solution can be justified on a purely financial basis. The purchaser is saying, "Here's a PFI that can build up liabilities which the Government may have to pick up from the private sector." The York Economics Consortium is saying exactly the same thing. There is also a third body, the King's Fund, which commissioned the CASPE Consulting report, which said: Business people are used to taking risks, but of a calculated sort. The Trust is expecting to start negotiations with Private Finance Consortia soon. I break off there. One hundred people from the private finance world seeing £260 million coming into their hands have said that they are interested. Of course they are interested. They will be particularly interested if the Bill is passed and their liabilities are picked up if and when things go wrong.

The report continued: Even on the figures in the OBC"— the outline business case— it would appear wise for any of the possible consortia to check whether the CASPE Consulting St. Bartholomew's Foundation option incorporating new partnerships would not produce better returns and do so much more quickly … even the preliminary work undertaken to date suggests that a complete reconsideration and development of a new Foundation option, incorporating the service proposals of both NHS and non NHS partners, would be wise and be likely to produce a better solution for the NHS. Those three prestigious groups, the purchaser, the York Economics Consortium and the King's Fund, which produced the original documentation on which the private finance initiative was based, are all now saying that this is a major scheme—by the standards of everything that the Secretary of State has told us, a mega-scheme—which could go horribly wrong. If it goes horribly wrong, the private finance consortia will want the Bill. They are another group of bankers who will not sign unless they get the Bill.

The Government, in effect, are promising the private finance consortia two things. First, they are promising them the Bill and, secondly, they are saying behind our backs—I put it to the Secretary of State and he said that he knew about it, and I also put it to Gerry Green, the chief executive of the Royal Hospitals NHS trust—"We can get around this because, if we get the Bill and we have got them to sign the private finance initiative, we can increase the size of the hospital from 750 to 1,020 beds."

That requires a new outline business case. The public have been told nothing about that. If I had not raised it at a meeting of the Treasury Select Committee, no one would know it even now. It would require a new outline business case and new consultation. Therefore, this is a process to avoid the new outline business case and the new consultation. It is all predicated on first getting the Bill through and then getting the private finance consortia to sign.

The Secretary of State has said that he does not want any of the private finance initiatives to take place against—I am not sure that I have his exact words—a difficult political decision. Who does he think he is kidding? Those private finance consortia really should now think hard about exactly what they are signing and exactly what response they expect from a future Labour Government who could be in power before any of these schemes have been signed. The response that they will get is the responsible attitude of my hon. Friend the Member for Peckham. Therefore, they have a lot of worrying to do about the Bill, and so has the House.

6.32 pm
Mr. Jacques Arnold (Gravesham)

I am delighted to support the Bill. It is a technical but none the less important measure. It is essential that contractors and suppliers to NHS trusts are secure in their credit arrangements for the work that they do for the national health service. It is absolutely important for the suppliers and for the private finance initiative.

The PFI represents building for the future of our NHS, and it is particularly relevant to the hospitals in north-west Kent. At present, hospital provision in north-west Kent is spread across three sites—the Joyce Green hospital, north of Dartford, an old fever hospital; the West Hill hospital in Dartford, an old poor law house; and the Gravesend and North Kent hospital in my constituency, a subscription hospital from the previous century.

Our in-patient hospital services are spread across those three sites and they are administered by the Dartford and Gravesham NHS trust. They are far from ideal. In fact, those hospitals have possibly the worst fabric of any in the former south-east Thames region. Nevertheless, they work for us very well because of the dedication of our doctors and nurses and everyone else who works there. But we desperately need our new district general hospital.

For years now, as in other cases mentioned in the debate, we have seen plans come and go and be put off. The reason for that is simple. If one goes to the Chancellor of the Exchequer of the day and asks for a cheque for £100 million, either one gets a dusty answer and it is back to the drawing board, or one is asked, "Couldn't it be done in phases on one of the existing three sites?" A first phase would be allowed immediately; then, after some scratching of heads and playing with the capital programme, there might be a second phase a few years down the road; later still, there might be a third phase.

The new district general hospital for north-west Kent has been designed, redesigned and redesigned again. Round and round we have gone. That is not to say that the Government have not been building new hospitals. I wanted to make this point when I tried to intervene on the hon. Member for Peckham (Ms Harman), but her courage failed her and she did not feel able to give way as she had promised to do on a number of occasions. The Government have had a massive hospital capital programme. Since they came to office in 1979, there have been 800 major new hospital projects, each costing more than £1 million. I could have pointed out to the hon. Lady that that rate of investment is more than four times greater than that under the previous Labour Government. Nevertheless, our hospital in north-west Kent has not yet been built and nor have the others to which she referred. That is the crux of the issue.

We could wait in a long queue for the capital programme to come forward from the Chancellor of the Exchequer. Of course, it is a better programme than Labour ever had, but it is not moving fast enough for us in north-west Kent or in those other places that have been mentioned. That is why the PH is so valuable and why I and my constituents resent the ridiculous political posturing of the hon. Member for Peckham. It is not good enough. We want our hospital. The hon. Lady opposes the PFI yet makes no commitment on behalf of the Labour Government that she hopes might be elected. That leaves my constituents in the limbo with which they are all too familiar, but with the difference that they would be without hope.

The PFI has given my constituents hope. They have hope because the Government, through the NHS trust, have invited bids under the PFI to build that new general hospital in north-west Kent. Four major consortia have come forward keen to succeed in their bid to build and finance the hospital and, in the long term, to run its housekeeping—the servicing, the cleaning, the provision of groundsmen, the parking arrangements, the catering and a number of ancillary services. Under the PFI, they would provide the hospital, by means of a long lease for which they would be paid a substantial fee, and all the services. When I bear in mind the fact that the budget of our NHS trust is £56 million a year, there is obviously a certain amount of scope to do precisely that.

That is not privatisation. It is private provision under a contract, but the important point which is of concern to my constituents is that the NHS will put in the doctors, consultants, nurses, medical support, administration and booking arrangements so that we obtain the best possible health care from the facilities provided.

Thanks to the PFI, four consortia are bidding to build the brand new general hospital in north-west Kent. There are big names among them. Each consortium includes a major construction company—obviously so, as they are keen to secure the contract to build a major project—a catering and hotel servicing company, a financial company and a project administration company. They are likely to create an on-going, functioning hospital, with all the efficiency that the private sector can provide when its money is on the line.

As I told the House, we were always told to have a phase here and a phase there built on current locations, which would mean Joyce Green hospital near Dartford, a site immensely unpopular in Gravesend and not much more popular in Dartford. The old NHS financing system—still supported by the Labour party—would have led to a new hospital at Joyce Green. When we asked the four private sector bidders, through the bidding process, where they would build the new hospital for north-west Kent—surprise, surprise—the message from came back loud and clear: Joyce Green is unsuitable for a new hospital. That is most fascinating for my constituents.

The bidders would prefer the Darenth Park site between Dartford and Gravesend because that is the site preferred by my constituents and those of my hon. Friends the Members for Dartford (Mr. Dunn) and for Sevenoaks (Mr. Wolfson). That is what happens when the private sector is used, rather than the old-fashioned, bureaucratic system that we had in the past and in which Labour has a great belief.

Where are we now? The four bids are being considered carefully and in detail. It is all very well for the hon. Member for Peckham to make great fun about assessment, but my constituents want arrangements for the hospital to be thorough so that it will deliver our hospital services over many decades. We are not playing games when it comes to the health care of people in north-west Kent. I hope that that assessment is thorough and quick. All the signs are that that is precisely what is happening. We shall soon have a shortlist of two. There will then he public consultation of my constituents, who will be the patients in those hospitals. The contractual negotiations will then take place with a view to contracts being signed this autumn. Under the new PH system, my constituents have the best chance of progress that they have had under any Government.

When the contracts are completed and the project has been constructed and is operating, Joyce Green and West Hill hospitals in Dartford will pass into history and the Gravesend and North Kent hospital facility will become free and available. For many years, my constituents have had a dream: to have their own community hospital providing basic health care in Gravesend. Gravesend and North Kent hospital will have the opportunity to pass to the Thameslink Healthcare Services NHS trust. It will serve a conurbation of 100,000 souls in Gravesham and Southfleet, and in Longfield and New Barn in the constituency of my hon. Friend the Member for Dartford. It will provide valuable services in our town: minor injuries, out-patients, acute active rehabilitation, elderly care, general practitioner beds, primary health, physiotherapy, dental and diagnostic services, all in a community hospital that my constituents dearly wish to have. Again, that will be financed through a private finance initiative currently costed to the tune of £8.5 million.

If the NHS were structured and financed under the old Labour system, to which the hon. Member for Peckham seems to wish to return, my constituents would have remained in a queue for many years. It is now clear that the Conservative Government, with their new and imaginative PFI system, are taking our hospital project forward. We are already seeing the benefits of the NHS reforms. Fundholding general practices in my constituency have been successful beyond our wildest dreams.

Madam Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman. I am always happy to have passing references to local matters, but he seems to be moving a long way from the subject of the Bill. The Bill concerns winding things up rather than starting them off, which appears to be the main subject of his speech.

Mr. Arnold

The concern is that, if either of the two trusts to which I have referred—which will develop our general hospital or our community hospital—faced the risk of being wound up and of leaving creditors with no one to pursue, the contracts for the PFI and for supply of hospitals could be in doubt. That is why the Bill is so relevant. I am outlining my constituents' hopes, which could not be fulfilled under the old structure of financing the NHS, to which the Labour party remains wedded. The fulfilment of those hopes must be guaranteed by the passage of the Bill, which would ensure that proper financial security exists for PR contractors and for suppliers. That is vital.

That is the reason why I was distressed to hear the Opposition spokeswoman time and again attacking the PFI. Perhaps somewhat naively, my constituents and I took to heart the Leader of the Opposition's comment: The PFI is right in principle."—[Official Report, 28 November 1995; Vol. 267, c. 1077.] I thought that this matter might have gone out of the party political arena, but the performance of the Labour spokeswoman for health threw all those hopes out of the window by seeming to bring sterile party political battles into it. We heard quoted her comment to the Birmingham Health conference on 13 January this year: I don't call it a Private Finance Initiative, I call it a privatisation initiative. What is that supposed to mean? It appears to be hostile to the PFI, which is born out by the fact that the Labour party intends to vote against the Bill tonight.

We want the PFI. My constituents will understand and share my view that, apparently, we need a Conservative Government to take the PFI forward this and the other side of the next general election. Our hospital dreams depend on it. The PFI and all the legislation needed to make it a reality is vital to my constituents because, in respect of hospitals for north-west Kent, the PFI is turning dreams into reality.

6.47 pm
Mr. Simon Hughes (Southwark and Bermondsey)

The debate is prompted and motivated, and the Bill has been introduced, for two obvious reasons. There is the theoretical, academic reason, explained probably six times by the Secretary of State for Health in his speech. It is that the Secretary of State of the day might not pick up the tab if a trust were to be dissolved and left with debts. The real reason, however, is that the problem came to light once the Government started going at much greater speed than ever before down the private finance initiative road. That was the explanation. The Secretary of State was honest about it. The current law allows discretion for the Secretary of State to say, "No, sorry—I am not picking up the tab."

Clearly, dealing with the "not picking up the tab" point is important. In the part of the world from which I come, the South Thames training and enterprise council went to the wall a year and a quarter ago. The Secretary of State for Employment, as he then was—he is now Secretary of State for Defence—suddenly wound it up, and a number of people who had traded with it in the belief that it was an agent of Government were left whistling for their money: training providers, local colleges and local firms. Many never received their money.

The Government did the dirty. They claimed their entitlement, saying, "We are the preferred creditors, so we shall take our money first even if others must suffer." I know all about agents, or agencies, of Government that claim to be supported by the Treasury or other Departments, but are eventually shown to be other than what they claim. With members of the other main parties, I went to see the Secretary of State, and he told us that the same applied to local councils. If a council went to the wall, the Government could say, "Sorry, but we will not bail you out." A council could be declared bankrupt, but the Government would not be obliged to support it.

I believe that the Government should be responsible for Government agencies. Theoretically, therefore, I am happy for the law to be amended. But this is not just a theoretical issue—it is a practical issue. We are having this debate because the Government have clearly said that they cannot sign the PFI contracts—as emerged in the Select Committee on 4 March, none has yet been signed—unless assurances can be given that people will never be left whistling for their money. The reason is clear: the private sector partners will not play ball. I understand why they do not want to find themselves in bigger difficulties than they would otherwise.

That raises a general question that I have raised in the House before. When and where did Parliament decide that the national health service should become dependent on the private finance initiative in regard to capital projects? Unless I missed it, or it was written in invisible ink, nothing to that effect was included in the manifesto on which the Conservatives fought the last general election and, under our funny electoral system, won the election despite the fact that most people voted against them.

Since then, there has never been a formal statement of Government policy telling us that, in future, the capital building programme of the NHS will be funded by the private sector. The Government have allowed the PFI to creep in. They have said that they intend to rely on it in more and more ways, but they have not been so straightforward with the House. It is clear—this, too, emerged in the Treasury Select Committee—that, according to the original proposal put to Parliament by different Departments, the PFI was a way of raising extra money: it was not intended to serve as an excuse for substituting private for public money.

As was clear from the public expenditure statements made to the House at the end of November, there will be a 12.7 per cent. reduction in next year's publicly funded NHS capital programme. The Secretary of State confirmed that fact to the Select Committee. Although he did not say so explicitly, he was honest enough to accept that in reality the PFI is unlocking private money to make up for the fact that the Government are not committing public money to the hospital building programme.

My colleagues and I have no theological objection to the use of the private sector to supply public services. That is done every day of the week by, for instance, education authorities buying books for schools. We do, however, object to discovering suddenly that the proposition on which we had relied—that the hospital building programme, and other NHS capital projects, would be publicly funded—has been replaced by a proposal to cut public funding and replace it with private finance. I shall not vote for that unless we have tested to our satisfaction the proposition that we are to get better value for money—a proposition which, as recently as a year ago, was not supported by the Treasury. A year ago, the Treasury was still advising the Department of Health that the PFI would probably prove more rather than less expensive.

Let us suppose that a private sector consortium was commissioned to build a hospital. Let us also suppose that it was assumed that the private sector would use the hospital for 50 years, and that a 50-year rental agreement was drawn up. According to previous Treasury advice, even if the hospital was transferred to the public sector at the end of those 50 years for no more than the rental payment, the payments spread over that period would amount to more than would be involved in borrowing to spend now. We all know why that is: it is cheaper for the Government to borrow money than for anyone else to do so, because they are the most secure of all borrowers. It had always been assumed that they were the best borrower, because they obtained the best rates. If the Government were going to borrow to fund an NHS capital building programme, that was the cheapest way of providing the service.

When I have seen the evidence that proves what the Secretary of State now asserts, which is contrary to Treasury advice given less than a year ago—that it is cheaper for the private sector to build hospitals in Amersham, Scotland, the east end of London, on the south bank of the Thames and in Carlisle, for instance—I shall find it difficult to argue that that is not in the interests of the taxpayer and the consumer. But it has not been proved, and yet again we are putting the cart before the horse. We are cutting NHS capital expenditure. There is no argument about that: the Secretary of State has admitted that there is to be a 12.7 per cent. cut next year, and according to the Chancellor's Red Book over the next few years we shall see the largest relative reduction in expenditure on the health service capital programme since 1948.

The Parliamentary Under-Secretary of State for Health (Mr. John Horam)


Mr. Hughes

Yes, we shall. Since 1948, public expenditure on the health service has grown regularly, year on year. It has gone up and down, but the overall graph has risen. Over the next few years, as projected by the Chancellor, we shall see the greatest slowdown ever in the commitment of public capital expenditure to the NHS, and in its expansion. I can show the Minister the figures, which are in the public domain.

I shall not vote for such action, because I believe that the case must be proved before we sign up to it—and I will not sign up to action for which the motivation is driven not by accountancy or a desire for value for money, but by the approach of a general election which must be preceded by the delivery of tax cuts. The Chancellor delivered tax cuts last November; we opposed them, Labour abstained and the Government voted for them. He wants to deliver tax cuts next November; I assume that we shall again vote against them, Labour will again abstain and the Government will again vote for them. The only way in which the Chancellor can do that is by keeping down public expenditure, which means that he must transfer not just the risk but the cost to the private sector. A year ago, the Treasury said that that was the more expensive option, and I do not believe that those advisers have suddenly changed their minds.

I would be very happy with a procedure whereby the Treasury and Health Select Committees and the House took evidence from everyone concerned and subsequently decided whether the PFI was cheaper for hospital building, the provision of clinical services or a mixture of the two. That is what good legislation and policy should mean. But I am certainly not happy to sign up to something that says, "Last year it was bad news; this year it is good news." We have seen no evidence to show that anything has changed. I am less happy because, while the national health service is supposed to be run democratically, trusts meet and take decisions in secret and are accountable to nobody in the public whom they serve. They are accountable only to civil servants and the Secretary of State for Health.

The decision-making process to select the consortium to which a hospital project will go is not out in the open. Nor will a privately financed project be demonstrably cheaper—over 50 years, it may be more expensive. No one has agreed to that process apart from people who meet in secret behind closed doors. The public have not agreed to it. The Secretary of State told the Select Committee that financial deals with the private sector would not be approved unless those involved on the clinical side agreed. Who is to say to how many people, and to whom, the Government will talk? I have had plenty of experience of the Secretary of State talking to people in the health service and saying that they have agreed when they have not or when some have agreed and others have disagreed. That is why there is a risk.

I have a practical suggestion about how we should proceed. I do not want a system that tells me after the event whether a project is good value for money but one that tells me that before the event. I do not want a civil servant, the accounting officer, to report privately to the chief accounting officer, the chief executive of the NHS, through documents that the public cannot see and say whether a project is good value for money. I would be happy for an independent person such as the Comptroller and Auditor General to do that job. If his office said, "Right, go ahead, it is cheaper, and you can go ahead because it is better value for money," the project should go ahead. However, until and unless publicly accountable independent people, not employed by the Government of the day, give that advice so that the public can see and hear it, we are being asked to sign up to an unacceptable proposition.

The Minister will know of the example of the proposals before the Guy's and St. Thomas' NHS Trust because it serves many of his constituents. Surprise, surprise—the trust has got a bit of a private finance initiative idea. The hon. Member for Peckham (Ms Harman) made the point well that the PFI is being used an excuse for further delaying things that were about to go ahead. South of the river, we were about to go ahead with an outline business case that had been worked out by the trust. We were told that it was ready to be the final business case, but it never quite saw the light of day.

It was a bit like snakes and ladders. Just as we were about to move off the square, we were told, "Sorry, you've got to down the snake marked private finance initiative." We have to go back to the beginning to find whether the proposal that was worked up as part of trust's public sector plan could be done more cheaply in the private sector. It may be true, as was said earlier, that there had been no development for six years at Norwich hospital, but the PFI means having to go round an extra loop, which may take a year or two, before getting back to where one started. There is no guarantee that anything will have been achieved because it may prove that it would be more expensive to use the PFI than to use the original public route. The real issue about capital programmes and capital spend in the health service is ensuring that there is an accountable way of getting value for money irrespective of whether projects are in the public or private sectors.

I was delighted when the right hon. Member for Horsham (Sir P. Hordern), the Chairman of the Public Accounts Commission, told me last Monday that the Comptroller and Auditor General will investigate what has been happening south of the river, where a building project for Philip Harris house and associated works that were originally to have cost £56 million are now scheduled to cost £157 million. They were originally due to be finished in 1993; now, if we are lucky, they will be finished in 1997. That is the sort of question that I want answered.

The Government commissioned a building which, three years ago, they called the flagship building of the national health service. Why we are now told that we shall have to spend another £112 million on a new building on another site to do work for which the building on which we have just spent £150 million is specially built and equipped? Those are the questions that my constituents want answered. I am delighted that the Comptroller and Auditor General is to investigate them. I wish that he had been monitoring the system all through and made sure that projects, once money has been committed to them as being the best value for money, are seen through and that Government and officials behind closed doors do not suddenly change their minds about how to use buildings.

We will win the argument and prove that Philip Harris house should be used for its intended purpose. We will show that it will still be better value for money to use the building on which the money has been spent and not commit another £112 million somewhere else. I hope that the Government also realise that unless they agree, they will be throwing extra public money after that which they are already committed to spend.

Let us address the real questions, get the evidence out in the open and have an informed debate. We should not deceive ourselves that this is all about sharing risks. It is no more about sharing risks now, or in the future, than it has been in the past. Risks have always been shared. Whenever the health service commissions work from a private builder, there is a shared risk. If the private builder takes three years or goes bust, the project is covered by contracts and insurance. The health service was no worse off in that situation than it would be if a consortium and the health service, on behalf of the taxpayer, proposed to build or expand a hospital, clinic or other facility together.

I am happy to sign up to something which says that the NHS trusts should not suddenly leave people whistling for their money, but I am not prepared to do so without ever having been asked to approve the proposal that we replace public by private money and start moving the whole NHS capital building programme from the public sector to the private sector. Until and unless we are given some assurances about the way in which the health service is going and whether it is being openly and accountably managed so that we can see that we are getting the best value for money for everyone, we shall reserve our position on the Bill and vote for Labour's reasoned amendment. We shall not vote if there is a Division on Second Reading because we cannot approve a package deal that conceals more than it reveals.

7.6 pm

Mr. John Whittingdale (Colchester, South and Maldon)

Labour Members' speeches consisted mainly of a combination of synthetic outrage and scaremongering. I exclude the hon. Member for Southwark and Bermondsey (Mr. Hughes) from that charge. His was a more reasoned critique of the private finance initiative, although I do not entirely agree with what he had to say.

The Bill is largely a technical measure but nevertheless one of some importance. It is necessary to ensure the continuing success of the PFI in the NHS. The PFI already greatly benefits the health service.

Before the autumn statement in 1992, hon. Members will recall that Treasury orthodoxy was implacably opposed to the use of private capital on public sector projects. Almost any suggestion immediately fell foul of the notorious Ryrie rules, which were almost designed to ensure that the conditions set for privately financed projects were impossible to meet. I pay tribute to my right hon. Friend the Secretary of State for Health who, as Financial Secretary, had the imagination to ignore the mandarins and break free of the rigid Treasury constraints. It was perhaps unsurprising that, to begin with, attention focused on opportunities to use private capital for transport projects because it is easier to create a stream of income from tolling which would give private investors their return on such projects. For services that are specifically free to the user, such as the NHS, it is more complicated to ensure the return on capital. However, the advantages of private sector involvement in the financing of capital projects are the same as in every other area of public sector provision. They include the opportunity to take advantage of additional skills and expertise, to gain access to new sources of capital and to transfer risk. Private sector involvement allows the NHS to share overheads and benefit from economies of scale.

There is no reason why publicly funded health care has to be supplied by publicly financed and managed hospitals. When the NHS takes on the design and construction of new facilities, it is exposed to risks that can impose costs and reduce efficiency. Anybody who has been involved in a construction project will know that there are 101 things that can push up the cost or throw out the timetable. The result is that more money has to be diverted away from patient care. The PFI allows those risks to be reduced and to be transferred to a private partner.

Since 1992, the PFI has taken root with the establishment of the PFI database in the health service and the requirement that all capital projects be tested to determine their potential for private sector input. The database significantly speeds up the process of matching NHS and private sector organisations with mutual interests, as well as providing a much wider range of potential partners from which a trust can choose. It also allows trusts to draw on the experiences of others in the NHS who have dealt with the private sector, to ensure that their knowledge and expertise are shared.

Already, considerable interest has been revealed and a number of projects are up and running. At its most exciting, the PFI allows the provision for NHS trusts of complete new hospitals, or significant parts of hospitals, funded by the private sector. But opportunities for private sector involvement in health care are by no means limited to the financing of capital-intensive hospital building projects. Indeed, a report commissioned last year by the London Implementation Group recommended that the only way to get privately financed primary health care centres built quickly in inner London would be to allow private health providers to both build and operate them.

In the first instance, trusts may concentrate on those assets and services that are not core functions, such as car parking, waste incineration, energy management, patient accommodation and hotel services, but other schemes may involve direct patient services that carry a risk of uncertain revenue streams, such as dialysis, day surgery and domiciliary services. The past three years have seen a gathering momentum so that, having started at the back of the field, the NHS is now out in front in making use of the PFI. So far, 45 PFI projects have been approved by the NHS executive, with a total capital value of more than £160 million. However, by the end of next year projects worth more than £1 billion will have come forward for assessment and approval.

Under this Government, an enormous amount is being spent on the health service—not just in current spending on patient care, but on capital projects as well. My own constituency is served by two general hospitals, each of which is seeing substantial investment in the expansion of facilities. My constituents in Maldon are served by Broomfield hospital in Chelmsford. I am pleased to see my hon. Friend the Member for Chelmsford (Mr. Burns) in the Chamber. He, too, takes a close interest in the progress of that hospital. When he and I visited it recently, we saw that work had just started on a £25 million development. This will include six new theatres, a 20-bed burns unit with its own operating theatre, a 20-bed children's ward and six adult wards for plastic surgery, orthopaedic and rheumatology services, not to mention a new pharmacy, a new hydrotherapy pool and a new medical records library.

The hon. Member for Peckham (Ms Harman) referred to the Governments's hospital building programme as castles in the air. Those projects are no castles in the air—they are in train and will soon be available for patient care. When it is completed in two years' time, clinical space at Broomfield will be increased by more than 50 per cent.

Mr. Simon Hughes

I do not doubt what the hon. Gentleman says. My brother, who is his constituent, will no doubt be grateful for the hon. Gentleman's work. However, can he say with his hand on his heart that he has been shown evidence to prove that over the whole of the costing and the payback of the project—or any other project—it is unarguably considerably cheaper than any other route that might have been followed?

Mr. Whittingdale

I am interested to learn that the hon. Gentleman's brother is my constituent. I shall regard it as a specific challenge to persuade him to vote for me. I would be happy to have greater analysis. I believe that the private sector is capable of building and running hospitals more cheaply than the public sector. There is already some evidence to support that. However, it is early days with the PH and I should be happy to see more work done to try to establish the precise facts. We are still in the early stages of private sector involvement in the building of hospitals for the NHS. I hope that there will be greater analysis in the coming months. I believe that it will show that the private sector is capable of building hospitals more cheaply and efficiently than the NHS.

It is not only my Maldon constituents who are benefiting from new capital facilities in the NHS. At Colchester general hospital, which covers the other end of my constituency—

Madam Deputy Speaker

Order. Before the hon. Gentleman continues, I must reiterate a point that I made earlier: hon. Members' remarks must be related to the Bill and not be simply a general survey of the NHS in an hon. Member's constituency.

Mr. Whittingdale

I entirely take that point, Madam Deputy Speaker. However, at Colchester general hospital in particular, it is the PFI that allows the project to go ahead and therefore benefit my constituents in future. Without the provisions of the Bill, I believe that there would be a threat to the continued success of the PFI, which then might result in such projects not proceeding.

At Colchester general hospital, work is far advanced on a new obstetrics, gynaecology and orthopaedics unit. The next part of the £30 million development programme is the re-provision of acute care for the elderly and rehabilitation facilities. That is being undertaken under the PFI at a cost of about £9 million. It should be in place next year. In due course, we can also look forward to a brand new cancer unit in Colchester.

For years, my constituents have lost out because resources have been sucked away from north Essex and into London. As a result, we have suffered from some of the longest waiting lists in the country. At last, that problem is now being addressed and this year the North Essex health authority has been given a £11.5 million increase over and above inflation. However, the real proof of the Government's commitment to the NHS in north Essex is the creation of, in effect, two new hospitals in Colchester and Chelmsford.

Despite the enormous amounts that are being devoted to health care, demand for new facilities is growing continuously. Improvements in medical technology and increasing demand for health care from an aging population mean that resources will always be under pressure—and when budgets are squeezed, it is usually the capital programme that bears the brunt. The PFI can increasingly relieve the NHS of the burden of capital expenditure. This Bill, by clarifying the legal and constitutional status of NHS trusts, will remove one of the last inhibiting factors which may hold back private investors from taking advantage of the PFI.

What is extraordinary is the attitude of the Opposition to the Bill. In the past, they have said that they support the use of private finance for public sector projects. Indeed, as we have heard, they have even attempted to claim that they originally suggested it. The right hon. Member for Sedgefield (Mr. Blair) is on record as saying that they have supported the PFI and, in many ways, have been advocating it. It therefore comes as something of a surprise to find that they are opposing the Bill.

The hon. Member for Peckham may not have caught up with the policy of her own party. Like the internal market, the purchaser-provider split, trust hospitals and, apparently, even general practitioner fundholding, she has not realised that it is another area where the Labour party is being forced to muzzle its previous opposition because of the obvious success of and support for those policies. It is certainly possible that she may not have understood the evolution in Labour party thinking, for on the very same day as her leader was expressing his support for the PFI, she was on the "Today" programme saying that the PFI was a new trick to privatise the NHS.

As is the case in so many other areas, the Labour party is in a state of total confusion: it knows that the public finance initiative is working, but it cannot bring itself to say so. The Labour party's ideology prevents it from admitting that the private sector is ever capable of doing things better than the public sector. We are entitled to know whether the Labour party would abandon the PFI, and stop the construction of the hospitals and the facilities that are being built by the PFI. Would the Labour party spend taxpayers' money to replace the investment which is now being financed by the private sector? What is the price tag on its ideological hostility? We have not received any answers to these questions during the debate.

The Bill is a sensible measure: it will ensure that the national health service continues to meet its debts, it will reinforce the confidence of private investors to participate in NHS capital projects and it will allow the PFI to continue to help us build an even better health service.

7.20 pm
Mr. William O'Brien (Normanton)

The hon. Member for Colchester, South and Maldon (Mr. Whittingdale) obviously did not listen to my hon. Friend the Member for Peckham (Ms Harman) when she addressed the House and explained how the Labour party looks upon the public finance initiative programme, in this instance involving the national health service. My hon. Friend made it clear that the Labour party believes in a partnership arrangement between the public sector and the private sector.

The fact that there is no partnership arrangement with the PFI in the national health service makes us suspicious of what the Government plan. Conservative Members have said that they agree that the financiers should design, plan, build and run the hospitals. If that is not privatisation by the back door, what do Conservative Members require to prove to them that this is a privatisation of the national health service?

I draw hon. Members' attention to why I requested to speak in the debate. The Bill is of paramount interest to my constituents, in particular, and to the people of the Wakefield district, in general. Pinderfields general hospital, in Wakefield, is in my constituency. The doctors, the nurses and the support staff of the hospital are dedicated to the service that they provide and they deserve more help from the Department of Health.

I could have included the chief executive in the list of dedicated people at Pinderfields general hospital, but he left his post on Friday last week. I understand that the director of medical services is currently acting as the chief executive, in addition to performing his normal duties. The director was due to retire in July, but he has agreed to continue to work for a further 18 months, if required.

We are witnessing a further chapter in the Pinderfields scenario—a scenario that has continued for a considerable amount of time. Perhaps the Under-Secretary of State for Health, the hon. Member for Orpington (Mr. Horam), when he replies to the debate, can shed some light on what is taking place in Pinderfields general hospital trust.

I draw hon. Members' attention to some of the conditions under which the staff of Pinderfields must work and under which patients receive treatment. If there were a transfer of residual liabilities, a large area of Pinderfields general hospital would be worth very little. A number of the wards at Pinderfields general hospital were provided in 1940 for the wounded personnel of Her Majesty's forces. Approximately 30 temporary buildings were put into place as a provisional hospital—at that time, they were called the huts. The estimated life of the huts—with care, attention and maintenance—was 25 years. Many of the huts are still providing places for patients: 56 years after they were built and more than 30 years after what was estimated to be their useful life.

In 1949, I spent three months in H ward of the hospital because of an accident in the mining industry. At that time, the wards were well maintained, clean and well serviced. They fulfilled a useful purpose. Those wards are now residual liabilities. Over the past 20 years many promises have been made on the provision of a new hospital on the Pinderfields site to replace the 56-year-old temporary buildings.

A great deal of money has been spent trying to keep the huts at a standard fit for people to receive treatment and for people to work. They have had to make do and mend. On a number of occasions, we have been promised a new hospital, but, as yet, no provision has been made. The huts are built on a gradient and transferring patients on chairs and on trolleys can be a task. This is part of the legacy of the development that took place almost 60 years ago.

A new hospital is needed at Pinderfields. Additions have been made to the general hospital in the form of a new accident and emergency unit, and maternity facilities were transferred from Manygates health clinic in Wakefield. We have been told that there could be further transfers of that maternity service away from Wakefield. This issue is causing great concern to many of my constituents and to people in the Wakefield area in general. The accident and emergency unit and the maternity unit rely on some of the old premises to which I have referred.

Wakefield district is served by two general hospitals: Pinderfields and Pontefract. The latter is currently performing well, and it is fulfilling a most demanding and useful purpose. A few years ago there were eight to 10 hospitals in the Wakefield area, but now there are only two. Last year it was suggested that a new hospital could be built on a greenfield site to replace the existing two hospitals. That suggestion was dropped as a result of pressures from local people—the indigenous population—because they could see problems with closing the two hospitals and with the siting of a new hospital.

We have been advised that at Pinderfields general hospital there will be a £60 million replacement of the old huts and new buildings will supplement the existing and traditional buildings. We have also been advised that between £9 million and £12 million will be spent on Pontefract general hospital. Who will provide the capital? The Government say that it must come from the private finance initiative—and that is why we have this Bill.

We have been informed that the private sector will not sign contracts because of the existing laws. As has been pointed out by the Secretary of State and by my hon. Friend the Member for Peckham, under the law as it now stands, when a trust ceases to exist the Secretary of State need not accept the liabilities of the failed trust, including any liabilities under the PFI contracts. The Bill will resolve the problem of the private sector, but it will create impossible problems for the public sector—in this case, the national health service. It requires the Secretary of State to stand behind liabilities over which he has no control, which may total £5 billion, although we have heard that the figure might increase to £10 billion. That is the magnitude of the problem underlying the assurances that the Bill would give the private sector.

Pinderfields Hospital NHS trust wishes to enter into a PFI contract to build the new hospital. I ask the Secretary of State or the Minister, what is our chance of having a new hospital in the Wakefield area? Too many broken promises have been made, and there is little hope of new facilities.

What will the PFI partner demand from the hospital trust? Will the Secretary of State ensure that the PFI benefactor will not demand to be responsible for employing cleaners, for heating supplies and for the back-up services and responsibilities of the new hospital? We are informed that there might be demands in the PFI agreement for the PFI to engage people and run the hospital as an agent on behalf of the trust.

May we have clear, decisive answers to my questions and those asked by other Opposition Members? When can we have a new hospital, and will it be run and administered by the national health service with no strings attached to the PFI agreement?

The position in Pinderfields and in Wakefield is unusual because the Pinderfields site covers a substantial tract of land, owned by the trust, which could be developed for housing and commercial undertakings and is of value—

Mr. Deputy Speaker (Mr. Michael Morris)

Order. I have listened attentively to the hon. Gentleman. This is a Bill about the totality of the PFI and the covering of potential debts. It is not appropriate to go into the detail of the landholdings of a particular hospital.

Mr. O'Brien

I was arguing that the liabilities mentioned in the Bill include liabilities that are of value to the PFI developer. That aspect of PFI development worries many people, because there are assets that might influence an agreement.

On that site is the old Stanley Royd hospital, which would be included under the heading of liabilities in the Bill but is a valuable area of land and buildings. If that is included in the liabilities, it will be a substantial incentive to the PFI partner. I draw attention to that background because, if that area were of value and were valued, the PFI would make little effort to raise money because the money would be there in buildings and land, which are now available for disposal.

Why do we need a PFI in the Pontefract and Wakefield area when all those "liabilities" that are really assets are available to the NHS? Why do we need a private sector partner when the NHS has those valuable assets at its disposal? Who are the people in the NHS and the trusts, representing the people of Wakefield, who would offer our hospital services to private money-lenders when valuable public assets are available?

The PFI is privatisation in the form in which it has been presented tonight, and the Bill is intended to prop up the private sector. Why must we proceed down that road?

At present, we have two trusts and two hospitals. We are told that the two trusts will merge into one—each trust will cease to operate and a new one will be created. Problems are inherent in such an arrangement. There is much suspicion about the proposal. We are told that there will be a three-month consultation process before the new trust can be formed.

I draw the Minister's attention to a letter that was sent to the Secretary of State by the chairman of Wakefield community health council, in which he drew attention to the practices of previous Administrations. He said that members of Wakefield CHC are extremely concerned that promises that were made when previous Administrations were changed have not been fulfilled. The letter explains the anxieties of many people in my constituency—

Mr. Deputy Speaker

Order. Unless the CHC especially refers to the Bill, this sort of contribution is not in order in the debate. It is fair enough to use the example of the hospital in the hon. Gentleman's constituency to elucidate the main elements of the Bill, but not just to record what the CHC said on a previous occasion about that development.

Mr. O'Brien

Mr. Deputy Speaker, I am drawing attention to the lack of confidence in the consultation procedure that we are advised must be undertaken. If the Secretary of State and the Minister read carefully the letter of 6 March from the chairman of the CHC, they will understand why, in view of what happened previously, people in the Wakefield area are suspicious of the proposals to build a new hospital under the PFI and to change the hospital trusts.

Unless the Minister can give assurances tonight about the issues that I have mentioned on behalf of my constituents and the people who depend on the services of Pinderfields general hospital, and allay their suspicions, we shall not have the confidence that one would expect when debating such a Bill.

Because of the experiences mentioned by the chairman of the CHC and other people in the Wakefield area, I believe that the reasoned amendment tabled in the name of Labour Members should be supported.

7.38 pm
Mr. Peter Luff (Worcester)

Mr. Deputy Speaker, I apologise to you and to the House for not being in the Chamber for the opening speeches; my parliamentary duties elsewhere, including attendance at a Delegated Legislation Committee, meant that I could not be here.

I am very anxious to speak in the debate because I regard the passage of the Bill as crucial to the interests of my constituents, in bringing about the construction of a new hospital in Worcester. If the hon. Member for Normanton (Mr. O'Brien), whose speech was more reasonable than those of some of his colleagues, really wants a new hospital to be built in his constituency soon, as he says, he should reconsider his voting intentions, because a vote for the reasoned amendment and against Second Reading would further delay the hospital's construction. I am anxious to avoid that in my case, and the hon. Gentleman should be anxious to avoid it in his constituency.

It is a shame that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) marred a typically effective and detailed contribution by his extraordinary attack on my right hon. Friend the Secretary of State. To accuse my right hon. Friend of indolence and ignorance—I believe that those were the words that the hon. Gentleman used—is like accusing the hon. Member for Bolsover (Mr. Skinner) of being a member of new Labour, as it is just about as implausible. I am sorry that the hon. Gentleman marred his contribution by such comments.

I was also sorry to hear the speech of my hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale) as, in his fine contribution, he said many of the things that I had been hoping to say in my speech. [Interruption.] I hear cries from the Opposition Benches that my hon. Friend was reading from a central office brief. I can let Opposition Members into a secret: I have seen that brief and I know that my hon. Friend was not reading from it; he was making his own speech—for which I pay tribute to him.

The Bill is genuinely technical. It is effectively a one-clause Bill for each hon. Member. Clause 1 is for hon. Members from England and Wales; clause 2 is for hon. Members from Scotland; and clause 3 is for hon. Members from Northern Ireland. Each hon. Member regards the Bill with his or her own constituency in mind and sees it as a one-clause Bill. It is almost a two-phrase Bill. Clause 1 states that the Secretary of State must exercise his statutory powers to transfer property, rights and liabilities of the body so as to secure that all of its liabilities are dealt with. The last few words of that phrase, so as to secure that all of its liabilities are dealt with", go to the heart of our consideration of the Bill; they also go to the heart of the future of the PFI in the national health service.

The notes to clauses, which were helpfully provided by the Department of Health, clearly state what the Bill is about. The notes state: The policy objective is to ensure that, if a NHS trust is dissolved or a health authority or special health authority abolished, its liabilities are transferred to another specified NHS body, or the Secretary of State. This is to ensure there are no residual liabilities left outstanding. The objective is to assure those who contract with such NHS bodies that liabilities will not be extinguished in the event of a NHS trust, health authority or special health authority ceasing to exist. The next paragraph of the notes is important: To date all liabilities of trusts have been transferred elsewhere on dissolution, and even without this legislation it is most unlikely that the Secretary of State would not do so in future. This change, however, removes all doubt on the matter. If I understand the Bill correctly, it simply makes it clear that the taxpayer stands, as he or she should, firmly behind all the liabilities of the national health service. To that extent, the Bill should not attract any controversy in the House this evening. What it means in practical terms is tremendously important. It provides the reassurance that is crucial to all those who trade with the NHS, from the smallest retailer—the provider of the odd bit of stationery or greengrocery—to the largest PFI contractor. There will always be someone who is prepared to honour the NHS's side of the contract.

Does it matter whether we pass the Bill? After all, the notes on clauses state that, in practice, all liabilities have so far been transferred elsewhere on dissolution and it is most unlikely that the Secretary of State will do anything different in future. But the Bill matters fundamentally to the future of the PFI, because those who stand behind the PFI contractors—those who will undertake the financing of projects—attach huge importance to the provision. Therefore, it must matter to every hon. Member who cares about the future of the NHS and who shares the vision, which I thought was common across the House, of the need to develop a more effective partnership between the public and private sectors.

What the PFI does—and will be able to do only if the Bill secures its passage—is to provide more capital than would otherwise have been available for the NHS. We can play word games about whether that money is additional to the overall levels of funding, but, ultimately, the Bill will enable an overall increase in the capital schemes in the NHS.

About 25 large-scale NHS/PFI schemes have recently been advertised in the Official Journal of the European Communities—all the schemes are worth more than £25 million. I am afraid that I have not done the arithmetic in my head, but the resulting sum of money is clearly large. I am glad to say that one of the schemes that has been advertised in the journal is for the new Worcester district general hospital.

If only half those 25 schemes were to succeed and come to fruition, that would still represent a huge increase in the capital programme of the NHS. That capital programme is significantly higher now than it was when the Government came to power. There has been a huge increase in the capital programme of the NHS, plus massive increases in current expenditure on it—there have been massive real terms increases. I think that I am right in saying that there has been an increase from about 4.7 per cent. of gross domestic product in 1979 to more than 6 per cent. now. The capital programme could be threatened if the Bill did not secure its passage.

The working of the PFI depends on the substantial transfer of risk to the private sector. What sort of risks? The obvious risks are in design and construction, and in the costs associated with the commissioning of any new facility. There are also risks involved in the costs of operating that facility; there is a risk that, during the facility's lifetime, technological obsolescence may occur. All those risks need to be transferred to the private sector as part of the PFI, but the Bill deals with one risk that need not be—and should not and could not be expected to be—transferred to the private sector. If I have understood it correctly, that risk is that the Secretary of State might rob a trust of its hospital and leave all the liabilities behind. That risk would clearly worry any reasonable-minded financier or lawyer.

The Bill is important; an article in today's edition of the Financial Times states: PFI hopes hinge on emergency bill". I do not know to what extent it is an emergency Bill, but I agree with the first half of that: PFI hopes do hinge on the Bill. I shall be fair and even-handed; the article states that while some analysts are not yet convinced of the long-term viability of PFI in the health sector, most seem to accept Mr. Dorrell's assurances on the bill. Mr. Kingsley Manning, managing director of Newchurch and Co, a consulting firm involved in several health PFI projects, said that the risk transfer in PFI was never meant to refer to trust liabilities. The article quotes Mr. Manning as saying: The risks that the government is attempting to transfer through PFI are those that the private sector operators would be expected to have some control over, like volume, activity and performance … The new legislation just puts health in line with other government departments. It is as simple as that: the Bill simply puts the Department of Health in line with the other Departments of State that use the PFI.

The PFI does not seek to privatise the health service. Opposition Members' attitude to the Bill and the PFI is confusing. I sometimes hear them claim that they invented the PFI and I sometimes hear them seek to undermine it—often on the same day, to different audiences. On 28 November last year, the Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), said from the Dispatch Box: The PFI is right in principle. We have supported it, and in many ways we have been advocating it."—[Official Report, 28 November 1995; Vol. 267, c. 1077.] The right hon. Gentleman should let his vote follow his voice and support the Bill this evening—it is crucial to the future of the PFI.

At a conference in London in May last year, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), the deputy leader of the Labour party, said: I have long been associated with arguing for public-private partnerships … I made the case for private sector involvement in public investment. However, only four or five weeks later, the right hon. Member for Derby, South (Mrs. Beckett) said from the Dispatch Box: there is growing alarm at the way … in which the Government openly use the private finance initiative to privatise core … services."—[Official Report, 3 July 1995; Vol. 263, c. 23.] Labour Members must make up their minds—and, with respect, they should decide to support the Bill, which will genuinely enhance the future prospects of the PFI. On 18 January, the hon. Member for Rother Valley (Mr. Barron) said: We do not disagree with the PFI, how could we? It was Labour who first thought of partnerships between the public and private sector". Perhaps he should have listened to the remarks of his hon. Friend the Member for Peckham (Ms Harman) only five days earlier at a conference in Birmingham, when she said: I don't call it a Private Finance Initiative, I call it a privatisation initiative. Labour Members seem to be saying two things but doing only one of them—that seems to sum up their position with regard to the Bill and the PFI.

The Bill is an essential underpinning of the PFI, which is the pragmatic way of introducing partnership into the national health service. The debate so far has focused too much on the issue of cost. Of course cost matters, but the hon. Member for Southwark and Bermondsey (Mr. Hughes) seemed to believe that the issue is only about cost. It is not. The benefits include additional capital funding, which will mean more projects overall and better cost control—so there is an element of discipline related to cost. The PFI will reduce the risk for the taxpayer and make better use of existing assets, as the hon. Member for Normanton said. I am sure that some imaginative ideas will come forward as part of the PFI bidding process in the health sector, about how to use the residual assets of NHS trusts.

My constituency case involves three sites, and I believe that the involvement of the private sector will assist us to make good use of them. The private sector will bring a more constructive and entrepreneurial approach to the issue, rather than the old, staid public sector approach. The PFI will shorten construction times by introducing innovations in the way in which hospitals are built. That will bring real benefits. We have seen how, in the Prison Service, private contractors can build more quickly than builders were able to under the old public sector contracts.

There will be innovation in its fullest sense. I have hinted already at innovation in the construction process and at making better use of existing assets. There will be innovation also in service provision. Those benefits could be jeopardised if the Bill did not receive a Second Reading, because the flow of PFI finance to big projects would dry up immediately.

Much of what I have heard in the debate leads me to believe that Labour Members have reverted to type—to old Labour—in opposing the Bill. The hon. Member for Normanton referred to "private moneylenders"—which is a particularly graphic and vengeful phrase. That old hostility has come through the debate with stark and startling clarity.

The fact that innovation will be put at risk if the Bill does not receive a Second Reading is best illustrated by what is occurring in South Worcestershire. The South Worcestershire community NHS trust has co-operated with a local fitness centre to provide a £250,000 scheme that will benefit the whole community and provide new services and revenue to the trust. My right hon. Friend the Secretary of State visited the facility on Friday last week, and he was deeply impressed by what he saw. If we do not pass the Bill, that scheme—which it is hoped will be replicated throughout the trust area—will face unnecessary difficulties and uncertainty in the future.

The trust has teamed with a health and fitness company to build a new exercise and fitness studio on the hospital site. The company, One-on-One, is working in partnership with the Evesham community hospital to help meet "The Health of the Nation" fitness targets. A press release issued last year states: Seven-and-a-half thousand square feet of brand new exercise and fitness studios with the very latest equipment will be ready for use in the autumn … But it's the alliance with the hospital that makes the health-promoting difference. Hospital patients will have access to new facilities and the award-winning 'One-on-One' team—they've gained a coveted British Standards/ISO 9002 Award for Quality—will be working as part of a wider NHS team to help persuade people across the Vale"— that is the Vale of Evesham— to become more physically active". That imaginative partnership scheme is the result not just of a partnership between the public and private sectors—I do not wish to pretend that it is as simple as that. More than one public sector body is involved: the public health department, the district council and the trust have forged an alliance that will benefit my constituents and those of my hon. Friend the Member for South Worcestershire (Sir M. Spicer).

That PFI scheme will provide innovative facilities for hospital patients at no cost to the trust. Unless we pass the Bill, innovative schemes such as that—which share risks and benefits between the public and private sectors and which have proved in practice to bring enormous benefits to both parties—will be put at unnecessary risk. I shall not weary you, Mr. Deputy Speaker, by listing the services that the scheme will provide.

Mr. Whittingdale

Go on.

Mr. Luff

No, I shall not as that might try your generosity, Mr. Deputy Speaker. Some of the schemes are clearly aimed primarily at the private sector aspects of the fitness centre: fitness testing, health and fitness for 50 years plus, sports injury rehabilitation and so on. However, there are some mainstream health facilities, including osteoporosis and arthritis care; respiratory, cardio pulmonary health and fitness and so on. That is the kind of innovation that can flow from the injection of private finance into the NHS, and it will be threatened if the Bill—which goes to the heart of the private finance initiative—does not secure a Second Reading.

The Bill is very important for all those who live in south Worcestershire. The people have campaigned for 30 years for a new hospital to replace the current three sites—one of which is the second oldest site in England where patients are still treated. The British Medical Association was founded on that site in Worcester many years ago. My predecessor, Lord Walker of Worcester, turned the first sod of the new hospital site in August 1993, but nothing has occurred since then. There has been a long battle to persuade the region about the business case for the hospital.

We now face the prospect of an excellent hospital with outstanding core medical facilities and a flexible number of beds. Everyone would benefit from the new facilities that the development would provide. The new Worcester hospital, for which my predecessor and I have campaigned so vigorously, must not falter because of a simple, technical issue that the House can resolve easily. That is why the Bill is important to me, to my constituents and to all those who live in south Worcestershire.

The private finance process is progressing well in Worcestershire: it is an example to other trusts round the country of how to achieve aims quickly and professionally. I am not prepared to let down the trust's hard-working managers and medical staff by allowing a problem at national level to thwart their attempts to advance the scheme quickly.

We face serious issues in creating the right commercial and organisational arrangements between the private sector and the NHS. However, the Bill clears away the main obstacle. There is an excellent team in Worcester, with a new chief executive, which is committed to making the private finance process work. It wants to pioneer a sensible deal that will combine the best of the national health service and the private sector, to bring the sorts of innovations that we have seen in Evesham in the past few months.

The trust has put out invitations to tender to three short-listed consortiums—Laser, Bovis and Bryants—and the bids are due to be received by 10 July this year. If all goes well—if there are no hiccups and the Bill secures its passage—the contracts should be signed this year.

Mr. Stephen Timms (Newham, North-East)

Notwithstanding what the article in the Financial Times said this morning, is the hon. Gentleman aware that the Secretary of State told the Treasury Select Committee that the Bill was not needed in order to complete those PFI deals?

Mr. Luff

I am at liberty to disagree with my Front Bench—that is one of the privileges that Back Benchers have. I think that the Bill is important, and that is also the view of those to whom I have spoken in the NHS. They think that their financiers will require the security afforded by the Bill, and I am very happy to take their advice. I shall listen to my right hon. Friend the Secretary of State, but I believe that the Bill is important—and my local trust believes that also.

The contracts with the three consortia must be signed and every legal obstacle must be removed from their path. We must provide suitable health care to the people of my county into the next millennium. Years of waiting can be brought to an end. The medical and clinical staff at the hospital deserve the full support of the House this evening, to ensure that the PFI helps them to deliver the highest-quality treatment for the patients whom they serve.

I looked at the reasoned amendment before the House and I despaired. It rests its case on the suggestion that there will be some abuse of the Private Finance Initiative to advance privatisation of the NHS". That is not how any Conservative Member sees it. We are committed to a public national health service, largely free at the point of delivery. If I thought that the Bill were a back-door route to the privatisation of NHS hospitals, I could not support it this evening. Private finance makes little or no difference to the basis on which health care is provided, but it will improve the quality of care, the range of services that hospitals can offer and the physical condition of hospitals.

Obviously, I hope that the debate will change the minds of Liberal and Labour Members and that the Opposition will be persuaded to drop their reasoned amendment and support the Bill on Second Reading. I want the Bill and I want my hospital, and I believe that the two are closely related. For narrow partisan reasons, I am tempted to hope that the Opposition stick to their guns and vote for the amendment and against Second Reading. If they do, they will have given me a powerful weapon in my county. when I explain what they have done to frustrate the construction of our new hospital.

8.1 pm

Mr. Sam Galbraith (Strathkelvin and Bearsden)

I was disappointed that the hon. Member for Worcester (Mr. Luff), who spoke for quite some time, did not speak before the hon. Member for Colchester, South and Maldon (Mr. Whittingdale). He could then have read out the Conservative central office brief and that would have stopped him using his usual tactics for prolonging the debate. They include repeating what others have said, reading out the Bill, its clauses and the notes to the clauses and then speaking at great length about his constituency.

Nevertheless, the hon. Gentleman and other Conservative Members confirmed two of my worst fears about the private finance initiative. First, whatever anyone says, it is in part a substitute for Government funding. It is no longer additional funding. Secondly, it is yet another method of slowly but surely privatising the national health service.

I remain of the view that, as far as possible, the NHS should be provided and financed by Government. That is not always possible. The potatoes are not always provided. To use the same analogy as the Secretary of State, tonight's measure might turn out to be the potato Bill.

It is important that the Government provide as much as possible, otherwise, bit by bit, the national health service is gradually eroded. Every time they erode a little piece, it becomes easier to erode another piece and that leads to the slippery slope, the black-white shift of philosophy whereby what was unacceptable yesterday becomes acceptable today, not because the principle has changed, but because there has been a slow but sure philosophical shift.

Having stated my position, I realise that there are practicalities. We live in the real world, there are constraints on the public sector borrowing requirement and Governments have to take account of such influences as interest rates. Therefore, there may be a case for considering the private finance initiative, provided that it is used in the interests of the health service, the risk is shared and the investment is to the benefit of all.

The more I look at it, the more obvious it becomes that the PFI is biased against the national health service and protects the private sector. The Bill completely removes all substantial risk from the private financier and places the liability back in our hands. It makes it easy for the private sector to become involved because there is no risk. The Bill gives what is virtually a carte blanche guarantee to the private sector. Trusts will be able to borrow money from the private sector and the Government will pick up the liability. I cannot see how that will not be set against the PSBR.

I understand that parts of the private finance initiative will not be set against the public sector borrowing requirement, but given the contents of the Bill and the projects that have been mentioned, I cannot understand how the Secretary of State can accept completely free and open liability for money borrowed by trusts through the PFI without setting it against the public sector borrowing requirement. Therefore, the private sector would incur no risk.

The hon. Member for Worcester said that some risks would be incurred. Those risks have been set out before, but they are minimal. First, there is a delivery risk. Contractors would be responsible for every aspect of establishing the service on time. Any contractor who is worried about delivering on time should not be in business. Secondly, there is volume risk, whereby the contractor cannot expect a guaranteed income. That is part of business. Even potato producers do not expect a guaranteed volume and they also incur a delivery risk. Thirdly, there are obsolescence risks. There is even a potential obsolescence risk with potatoes. Finally, there are economic risks, as contractors are no longer protected by inflation indexed payments. Those risks are part of normal contractual arrangements. They are normal business risks that anyone would expect.

The Bill does not seek to protect risks that anyone in business would expect. It seeks to protect almost open-ended liabilities incurred by trusts. They are not payments out of the current account; they are capital risks that will have to be set against the public sector borrowing requirement.

The PH has a long history. As the hon. Member for Colchester, South and Maldon, who read the Conservative central office brief, will know, it stems from the Ryrie rules that were established by the National Economic Development Council in 1981. They were designed to introduce private finance into nationalised industries, but they were very strictly drawn. They allowed public finance only if it was the cheapest option and the private sector carried the full risk. Those were two important criteria, and the Bill removes one of them. They were not viable because the private sector would not accept them on that basis, therefore they were amended over the years and eventually dropped.

They were replaced by the private finance initiative that was introduced in 1992 by the then Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont). He was quoted as saying that its purpose was to remove the unnecessary obstacles to private sector investment in Britain's infrastructure. He made sure that it was biased in favour of the private sector and that any risks would fall on the Government. That is what the Bill does.

The PFI comprises a number of features, including the possible involvement of leasing arrangements. As long as a project was shown to be profitable, it could go ahead without having to be compared with similar public sector activity, but there had to be a sensible transfer of risk. It was reiterated that the private sector must genuinely assume the risk. That proved to be unworkable, because the private sector would not accept the risk, so the Bill removes all risk from the private sector and places it once again with the Government and the taxpayer.

The private sector will fail to realise the potential. Conservative Members who made pleas for their constituencies and said that the PFI is the way forward have false hopes, as do the Government. The only way that they can succeed is if there is no risk to the private sector—I do not believe that the Treasury or any Government who believe in prudent finance could allow that to continue.

The PFI is more costly than the public sector. We all know that it costs the private sector more to raise finance than it does the Government, at 3 per cent. to 4 per cent. The only way in which that money can be recouped is by leasing charges or—as increasingly happens, and this is where the PFI produces problems—support services, leading eventually to medical services. In other words, that means the privatisation of the NHS, which is the Government's long-term aim.

Mr. Peter Puplett, a former economist with Tarmac, said about any charge: On the one hand, it could be set too low and the private sector would not find it viable to finance the project. On the other, it could prove too high and the project would become a licence to print money. The latter risk is something feared by Treasury officials and ministers alike. It is the hidden handicap of the PFI and explains why so little progress has been made. In other words, the Government cannot win—particularly if the Bill is passed. Yes, there are short-term advantages from the PFI and yes, immediate capital outlay is avoided—but the cost over the years, because of the charges inherent in the initiative, mean that in the long term, the PFI will be much more expensive. We will spend the rest of our lives paying for that which we apparently get for nothing today.

The PFI has no ability to establish priorities as to where the money goes, and with that goes a locked-in lack of flexibility. 'The Minister of State, Scottish Office who is on the Treasury Bench is responsible for the health service in Scotland, so he knows that Greater Glasgow health board leased under an initiative a large central office for its administrative services. Subsequently, the board's structure changed and evolution came about, and it no longer needed that office. Nevertheless, the board is locked into a 99-year lease, at massive cost, and it cannot get rid of that liability. The contractor does not mind because it is getting the money. The liability has fallen back on us.

A company tamed Takare in Glasgow looks after the care of the elderly. That model is no longer appropriate and we want to change it, but we are locked into a 15-year agreement under a PFI. Flexibility has been lost, charges have been increased and we are heading slowly but inexorably towards privatisation.

The Secretary of State for Health has said that there will be no PFI in the clinical services. He tempered that today, saying that there will be no PFI where that is not wanted. We all remember the reassurance that hospitals would not be allowed to opt out to become trusts without clinical approval. That was all nonsense. The hon. Member for Edinburgh, West (Lord James Douglas-Hamilton) knows that, despite the Secretary of State's remarks in this Parliament, the Scottish Office is seeking to involve private finance in not just building Stonehaven hospital and running the catering, portering and other services but in running every part of the clinical services. That is the reality in Scotland at present, and that is the PFI's hidden agenda.

The private finance initiative will not realise the hopes and dreams of Conservative Members in terms of new hospitals. It will produce long-term costs and lead slowly but inexorably towards privatisation of the NHS. For that reason, we are right to be wary of the PFI and to vote for the reasoned amendment.

8.14 pm
Mr. David Ashby (North-West Leicestershire)

I am pleased to follow the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith), but his speech was typical of new Labour—full of sound and fury. The hon. Gentleman made all sorts of statements about the Bill being no good. but he gave no reasons and offered no sensible alternatives. That also is typical of the Labour party, which is always ready to oppose a measure but never seems able to offer anything constructive in its place.

Mr. Martlew

Will the hon. Gentleman give way?

Mr. Ashby

No, I am going on for the moment. I have just started.

I am grateful to be called today because I want to show that I may be down but I am not out.

I am astounded that the Bill is being opposed because it is a simple measure to ensure only an organisation to honour the national health service side of contracts, be what may. It does not demand much more than that, in providing confidence in the public sector. The Opposition's arguments would be much better put in Committee than now, so why are they opposing the Second Reading of this simple Bill?

I am reminded of a constituent who came to my surgery three or four weeks ago, who had experienced some trouble with a double glazing company. I will not give its real name but will call it Parliamentary Double Glazing. My constituent had paid a deposit and then, horror of horrors, he discovered that the firm had gone into liquidation. He submitted a claim to the receiver, but was told, "Sorry, there's no money." Then my constituent found that Parliamentary Double Glazing remained in business, but was renamed Parliamentary Double Glazing Ltd. Mark 2. Then there will be mark 3 and mark 4. That experience gave my constituent no confidence in buying double glazing at all, let alone from Parliamentary Double Glazing. We have all heard of similar experiences in our surgeries.

What happens if trusts end and there are contracts to be fulfilled? Will there be nobody to honour those contracts and nobody to pay? Are we to have the National Health Service Parliamentary Double Glazing Ltd? Is that what we want? The Bill is highly technical and provides for the situation that I described. Why are the Opposition so keen to oppose it?

My hon. Friend the Member for Worcester (Mr. Luff) used a large number of quotations, starting with the Leader of the Opposition saying that the PH is right in principle, then the great whopper from the hon. Member for Rother Valley (Mr. Barron) that Labour had first thought of partnerships between the public and private sectors. There is no truth in that. There have been partnerships between those sectors from Conservative Governments for many a long day—but Labour likes, as always, to claim Conservative policies as its own. The Labour party loves to do that and it does it all the time, but the public will see through it.

The Labour party is like the emperor with his new clothes. But the problem is that the Labour party's background and credentials are completely different to ours. The Leader of the Opposition wears his new clothes. He came from Islington and was a member of the Campaign for Nuclear Disarmament and a left-winger so he is wearing new clothes. What is underneath the new clothes? The same body is still underneath. That is transparent, and exactly the same applies to the Labour party and to the speech by the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith).

The hon. Member for Normanton (Mr. O'Brien) said that public assets would be used by private money lenders. We have also heard that the Bill would mean privatisation, but that does not square at all with the Labour party's argument that it is in favour of the PFI. It has said that it does not disagree with the PFI and has even claimed that it thought of partnerships between the public and private sectors.

There are two sides in the Labour party and that is why it opposes the Bill. There has been no change at all in the party. Behind new Labour, there is a whole army that would not, under any circumstances, want the private sector to help any public sector body, be it the health service or any other body. In the constituencies, there is a bigger army behind the wafer-thin new Labour. Underneath it all is old Labour.

I cannot help feeling—I think that many people agree—that the real truth about the Labour party is that it does not want the national health service to succeed. It wants to be able to say that the NHS failed under the Conservatives, when it has been a great success story. The Labour party wants to undermine absolutely everything that we are doing. Despite everything Opposition Members have said, they want to see the PFI fail. Tonight, the Labour party is pandering to its left wing, and that is why it is opposing the Bill.

New Labour is like my house in my constituency; it has an 1820 front, but behind the front it is 200 years old. Labour Members put up a front, but behind it the house that they live in is the house of Keir Hardie and the unions, which brought so much disaster and unhappiness to this country. Disaster was caused by the over-powerful unions, especially in the national health service. The Labour party wants to return to its old ways. It pays only lip service to the direction in which we have gone.

I am delighted to speak in this debate because I, like others who are middle aged or entering into old age, use the health service more and more. My use of the health service has been rather public, I fear, and most people have read about it in the gutter newspapers. I use the national health service although I have BUPA. The hon. Member for Strathkelvin and Bearsden knows more about the gynaecological side than the male side—

Mr. Deputy Speaker

Order. The hon. Gentleman must relate his comments to the specific Bill before us or to the reasoned amendment.

Mr. Ashby

I hope that I have related my comments so far to the Bill.

I am proud of the NHS, because it is very good. I am proud about the direction in which the NHS has gone. I have always felt that private sector initiatives can be used by the NHS for the benefit of patients. That is the direction in which we should go, at our best and at our wisest. There is no demon in privatisation, although the Opposition would like to say that there is. What is good enough for the private sector is always good enough for the public sector and there is much to be gained from the private sector which would benefit the public sector.

The Labour party is anxious to build a wall between the public and private sectors. It pretends that they do not exist and fights any intrusion by the private sector, however good, into any of our institutions. The Labour party frightens the public about the national health service itself, but it also tries to frighten the public about private participation in the national health service.

The Bill is meant to give a morale boost to the private sector, yet it is opposed. We will not obtain private sector participation unless support is given to it. The private sector has to know that if it participates, it will not face bills that it should never have to face. The Bill would give the private sector a confidence that it should have.

It is a myth that the private finance initiative leads to delays. My right hon. Friend the Secretary of State for Health is a hard-working constituency Member in Leicestershire. I have known him for a long time and part of my constituency was in his constituency before the boundary changes in 1983. When I was selected, I consulted my right hon. Friend to find out what was happening and I asked him especially about the local national health service. We have done especially well. We have the new Glenfield hospital and various other hospitals in the centre of Leicester, but there were enormous delays in planning and financing those hospitals. It was a long time before we got the Glenfield hospital, even though I know that my right hon. Friend the Secretary of State worked hard to try to push the new hospital through.

The situation would be very different today. The problems started in 1979 because so many hospitals were closed by the Labour party and there were long delays in building new hospitals. As soon as the Conservative Government came to power, many new hospitals were built and new initiatives took place. If the PFI had been in place, those schemes could have come on much more quickly and we would have had more hospitals which would have been more successful.

A private sector of a sort has been involved in hospital building for some time. I have a marvellous community hospital in Coalville. Before the war, the local people started to collect for their community hospital. After the war, they collected harder, and then the project died away a little. Then there was a tremendous burst of energy and a great collection took place for the community hospital in Coalville. The people were able to participate, by their charitable efforts, in the building of the hospital. Such participation by the private sector in financing a community hospital gives the people involved a sense of belonging. After all, the private sector possesses a great deal of expertise and can do a great deal to help the public sector with its building programmes.

Another charge levelled at the Government is that no new money is forthcoming. The Government also stand charged—without a shred of evidence—of having cut funding for the NHS. We all know that that is not true. Changes in the health service and in the sort of provision of which it is capable have led to greater expenditure. We should always remember that all capital expenditure has a revenue implication, however.

We must make use of the best in the private sector. This Bill fulfils all that I hope for. I look forward to the legislation supporting the private sector in this initiative, and to even greater future initiatives that will allow the health service to expand, to give of its best and to continue to be efficient. The NHS is the jewel in our crown, and I am extremely proud of it. [Interruption.] I cannot hear a word of what the hon. Member for Strathkelvin and Bearsden is saying, so I shall take no notice of it.

The Conservative period in government has resulted in a vastly improved national health service. The Bill does everything possible to further that improvement.

8.32 pm
Mr. Eric Martlew (Carlisle)

I am glad to see the hon. Member for North-West Leicestershire (Mr. Ashby) in his place. It must have taken some courage for him to come to make a speech today, although I suspect it was not his best ever. When Conservatives read it in years to come, they may realise that they were wrong about the PFI. I am compelled to speak this evening because of the constituency problems created for my electors by the PFI and by measures such as this Bill.

There is no doubt that the Bill is about removing the risk from private companies, thereby allowing them to own our hospitals with no fear of being out of pocket. The original Treasury rules required schemes funded under the PFI to involve a genuine transfer of risk to the private sector so as to justify the rate of return that might be generated. The Bill gets rid of that risk, leaving just a higher rate of return.

The Bill has become necessary because the private finance initiative has fallen at the first hurdle. The banks have decided that they are not prepared to take the risk, while the Minister has decided that he cannot afford the political embarrassment of letting the PFI fall by the wayside.

The failure of the PFI is graphically illustrated in Carlisle. It is just one in a long list of broken Government promises about the development of our district general hospital, Cumberland infirmary. The redevelopment of that infirmary began in 1968 under a Labour Government, and the first phase was completed in 1974 under another Labour Government. Next, there were various false starts, but approval was finally given for phase 2 in 1988, under the old capital allocation rules. The scheme was worked up and a start date was sought, but in September 1992 the Carlisle hospitals, under pressure from the Government, decided to become a trust. When they looked at the figures, however, they decided that the trust would not be viable if it went ahead with the building scheme—so Government dogma got in the way and the scheme was abandoned.

The decision to abort the scheme was taken in the very week the tender was due to go out, so there was great anger in my constituency. The new trust promised to set about developing another scheme, and came up with one which, the trust claimed, would provide fewer beds but would achieve the same objective and bring in savings of nearly £2 million a year if the buildings went up on the same site. Much time and public money were expended; in fact, the chief executive has quoted a figure of £400,000 spent on fees to get the new scheme in place.

The trust's scheme was finalised in the summer of 1994. There followed another body blow: the Government stepped in and said that the scheme should be put through the PFI. The trust argued that it should go ahead under the old scheme, because that was ready. Alternatively, it should be fast-tracked. The Government, however, maintained that the PFI would not delay the scheme long—that it would take five or six months to get it through the system.

It took six months just to place the advertisement in the Official Journal of the European Communities, a necessary part of the legal preparations. So six months were lost to bureaucracy.

Next, hundreds of companies applied. They were sifted down to 16, and a great deal of work went into producing a short-list of three by 9 May 1995. This was heralded as a great victory for the PFI. On 5 September, a short press release was issued by the Carlisle Hospitals NHS trust, saying that two of the companies had pulled out. That left a short-list of one; logic dictates that there is not much competition in such circumstances. The PF initiative should have been aborted, and the public money that the Government had once promised should have been provided to build the hospital.

The Government insisted that the disciplines of the market place meant that a short-list of one was acceptable. I understand that one of the subsidiaries of the shortlisted company is being investigated by the Ministry of Defence and the police for fraud. I refer to AMEC. Fears are growing that, because AMEC is the only bidder, costs will escalate and the millions of pounds that were to be saved by putting the facilities on one site will not materialise. There could even be extra costs. I want to know from the Minister whether, if extra costs are involved, the Government will meet them—or will they have to come out of patient care? That would be wholly unacceptable.

I understand that, although there has been no official announcement, AMEC wants to run the portering, the catering, security, car parking and laundry services. It is also keenly interested—I bet it is—in running the medical records department. But the consultants in the hospital are opposed to that. There is a great deal of disquiet about the PFI among them, and they find themselves in a dilemma. They need the new hospital. They need the new facilities, but they do not want private sector involvement. One consultant said that it does not matter how good the surgeons are; if the laundry does not work and there are no sheets, one cannot do any operations. Another surgeon said: You can't expect a private company who has so much at stake in the hospital not to try to put profit before patient care". Consultants are in that dilemma. To some extent, many of us who have been promised new hospitals are in a dilemma: we do not want PFI, but we do not want our hospital projects delayed.

During a recent takeover bid for AMEC by Kvaerner, a Norwegian company, I met, on 11 December last year, the managing directors of both companies. I was able to get a commitment from AMEC that if it did get the scheme and took over some of the services, it would recognise a trade union. I had great difficulty explaining PFI to the Norwegian managing director of Kvaerner. He said, "We have done some privatisation in Norway, but we haven't stooped to selling off the hospitals yet." As it happened, AMEC beat off Kvaerner, which, I understand, is trying to take over Trafalgar House, but that is a different story.

The plans under consideration are creating great concern, because one of the options is to reduce the number of beds in Carlisle to less than what many of us think is necessary to provide adequate cover, especially in times of emergency, of epidemics. In the winter, there are many cases of flu and of people going into hospital. This year, there are 556 beds in Carlisle at our three sites, but the demand was such that we had to open up another ward. I understand that the bed numbers for the single-site hospital—there will be no more beds—will be 100 fewer than that total. Although I appreciate the growth of day surgery—I recently benefited from day surgery, and I suspect that, with a hernia, I would not have been able to stand for as long—we are greatly afraid. We are worried that we will get the worst of both worlds—that we will get the finance for the new hospital but that it will be decided that we cannot close the old city general, which will mean that there will be two sites, and that one hospital will be the workshop. That would be most unsatisfactory and most uneconomic from all points of view.

One forgets that when we are talking about delays in hospital provision we are talking about patient care, and, sometimes, unnecessary deaths; unfortunately, that is what happens in Carlisle. I do not believe in shroud waving, as it has no effect in this place, but the reality is that we have a problem in Carlisle with our maternity service, which is on the other side of the city from where the paediatricians are based. A report investigated the high number of perinatal mortalities in east Cumbria. On a regional basis, between 1988 and 1992, we should have had 55 deaths; we had 75.

In the northern region, my area is not one of particular deprivation, so the number of deaths should have been below the regional average, but that did not happen. One of the reasons given for that is that the paediatricians could not get across the city in time to treat sick babies. It was estimated, not by me but by the director in charge of community services in east Cumbria, that every year there are one or two unnecessary deaths of babies in Carlisle because of that. It has not been mentioned often enough today, but the delay in the provision of facilities costs lives, and PFI in my constituency has delayed our scheme by at least two years.

I have been involved in the health service in Cumbria for many years. For a short time, until we had a Conservative Government in 1979, I was chairman of the health authority. We have been fighting for better provision. I have said all along that I will not believe that we will get a new hospital until I see them lay the first bricks. In my case and, I suspect, in many others in the rest of the country, PFI will delay. It will be a sham. It will raise people's expectations, and at the end of the day the money will not be there. The bankers will not be able to finance it and the Government will not be able to afford the long-term costs. That is why I shall be voting for the reasoned amendment.

8.45 pm
Mr. Bob Dunn (Dartford)

I listened with great interest to the hon. Member for Carlisle (Mr. Martlew), who speaks with real experience, having been chairman of his local health authority in previous years. I understand the frustrations that he voiced about the future of the hospital in his constituency. At times, I have done the same in the House for my constituency of Dartford. Indeed, my hon. Friend the Member for Gravesham (Mr. Arnold) made a speech earlier—I was not able to hear it—and gave an account of the progress that we intend to make, and will make, in the provision of a new district general hospital in Dartford in the early part of next year.

Unlike the hon. Member for Carlisle, I prefer to look down the telescope the other way round. Whereas he looks from the big end down to the small, I look from the small end down to the big. A pessimist says that the bottle is half empty. An optimist says that the bottle is half full. Although we might have cause to unite, in the context of the Bill, on some manifestations of health service provision in the past few years, we must differ, in that the hon. Gentleman came to bury his health trust, whereas I come here to praise mine.

In the context of PFI, my hon. Friend the Minister will remember an Adjournment debate of 11 January this year, which I inspired, applied for and successfully obtained, on hospital provision in north-west Kent. My hon. Friend was able to tell the House on that occasion that my local health trust treated about 164,000 patients in 1994–95 and that it is expected that it will treat a further 10 per cent. in the present year. In addition, it achieved an impressive 5-star ranking in 1994–95 in the context of NHS performance tables.

As to where we see the PFI going, I can give an account of the delays, tribulations and frustrations in Dartford and Gravesham over the years, but I see the PFI as a real way forward—not a delaying or blocking mechanism or an impediment to provision but, rather, opening up and clearing the way. The window of opportunity, which we hear so often as a cliché, is real in the sense that my constituents can now look forward—if the process continues at the speed, and with the rigour and robustness we have seen hitherto—to the new district hospital being started in the early part of 1997.

The hon. Member for Carlisle gave an historical and chronological account of events in Carlisle. I shall do the same for Dartford, but not at great length. In June 1995, my local trust was granted approval to test the scheme, to provide a new general hospital under the PFI process. It advertised the scheme quite quickly in the Official Journal of the European Communities. On 5 September, following a pre-qualification exercise, four consortia, representing some big household names, were selected, and, of course, the process goes on. An important element in the short Adjournment debate on 11 January was that my hon. Friend the Minister was able to say: The overall process is as short and efficient as it can be, consistent with ensuring that value for money and the requirements of public accountability are achieved. If all goes to plan, building work should begin during the first half of 1997—that is the present supposition. My hon. Friend the Minister went on: I can assure my hon. Friend the Member for Dartford that the project has the full support of all concerned—at authority level, regional level, NHS executive level and Government level. I can assure him also that the evaluation will be carried out as speedily as possible in Whitehall, so there will be no delays at our end."—[Official Report, 11 January 1996; Vol. 269, c. 388–89.] This important legislation rounds off the process for those from the private sector who wish to enter into partnership with the health trust in the construction of hospital facilities and the provision of care services so essential in modern society. It will show them that there is a guarantee, support, an attitude of mind within Government, so that when and if existing health boards and trusts are wound up, there will be a commitment to fund the liabilities from the NHS side. This is important in the concept of partnership.

We have heard something tonight, and we will need to hear a little more, about where the Opposition stand in their support for the PFI. The hon. Member for Peckham (Ms Harman) tried but failed. She told the House that the Labour party supported the PFI but then proceeded to give reasons why she did not.

We have on public record the statement made by the Leader of the official Opposition on 4 October 1994 in a speech to his party conference. He said: We would get public and private finance working together in transport, in housing, in capital projects, in health and education. A little later, the right hon. Member for Derby, South (Mrs. Beckett), a former deputy leader of the Labour party, disagreed and said: Market testing represents creeping privatisation. As does the Private Finance Initiative. The present deputy leader of the Labour party, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), speaking at a London conference on 31 May 1995, said: I have long been associated with arguing for public-private partnerships". That is true. As shadow transport spokesman, he made that point during many debates. At that speech in London, he went on to say: I made the case for private sector involvement in public investment. Exactly so. The Opposition must decide what they stand for and give tonight an outright declaration of their support for the PFI as we have determined it in the context of the NHS.

The great benefit to the NHS of the PFI is that such private capital is additional to that which can be obtained from public funding sources. That is the most important point to be made in the debate. In the context of the PFI, we are talking about additional funds, not limiting but enhancing and improving public funding of the NHS.

I welcome the Bill. It is short compared with many that I have seen in my time. It is necessary. It gives undertakings, commitment and loyalty. I hope that Opposition Members will seriously think about how they vote tonight, and not make it a left-right, Opposition-Government matter, but join Conservative Members in the Lobby tonight. I give up on the hon. Member for Peckham, because she is wholly without commitment in everything that she says and does, but there are other Opposition Members who are much clearer in their philosophy and I invite them to join us in the Lobby this evening.

8.53 pm
Mr. Stephen Timms (Newham, North-East)

I begin by apologising to you, Mr. Deputy Speaker, and to the House for not being present at the beginning of the debate, but I was serving on Committees elsewhere in the House.

I support the Opposition amendment which sets out in crystal clear terms the problems with the Bill. The problem with the private finance initiative in the major hospital projects on which Conservative Members have concentrated today is that it does not really bring in any significant new money to those projects, but rather postpones payment of the bills.

In the case of a new toll bridge, for example, where a new source of revenue is created in the form of tolls, the PFI releases new capital from the private sector, which is additional and which can be used for constructing the bridge. But in the end, a hospital is all paid for out of taxation, and the rate of interest on the capital involved, because it comes from the private sector, is greater than it would be for a publicly financed project. Therefore, it is right for my hon. Friends to raise their concerns in the amendment about the use of the PFI in the health service.

That apart, if the only effect of the Bill was to reassure providers of private finance contributing to PFI projects there would be much less objection to it. In reality, however, it is a much wider Bill which appears to give a blank cheque to NHS trusts. It gives them unlimited security for borrowing, which they have never had before. NHS trusts have not been able to take out mortgages in the past, so they have done little borrowing. Under the Bill, the whole of the public sector would stand behind their borrowing but there is no mechanism in it to control the exercise of the immense new powers that it conveys upon them. That is the problem to which the amendment draws attention. As the amendment says, the Bill gives an open-ended commitment on the part of the taxpayer to honour the liabilities of NHS Trusts irrespective of the manner in which they have accrued". I have not yet heard any Conservative Member address that point.

NHS trusts cannot be dissolved through insolvency, only by order of the Secretary of State, and the Bill sets out what will then happen. In the few minutes that I have, I want to suggest some of the circumstances in which a trust might run into financial problems of a kind which could lead to the powers in the Bill being invoked, other than the circumstances for which we have been told that the Bill is intended—where a trust is dissolved for a non-financial reason and PFI liabilities are outstanding. But there are many other circumstances in which the powers in the Bill might be invoked. I shall illustrate that by describing the immense financial pressures being faced by health providers in my area of east London as the new financial year approaches. I want to concentrate on the possibility of trusts accruing liabilities in a manner other than through the PFI, as the reasoned amendment points out.

The work load borne by the health service in Newham is immense because the demand is immense. The Government's own figures show that Newham has the highest level of urban deprivation in the country with Tower Hamlets and Hackney, the other two areas covered by the East London and the City health authority, only just behind. I take no pleasure in saying it, but it is a fact that in east London there is an immense concentration of urban deprivation which is reflected in the area's health statistics. Whichever statistics one chooses, they all tell the same story: the health service in east London faces an immense task.

In 1988–92, the standardised mortality ratio in Newham was 109 compared with 100 in Britain. In 1992, it was 113. From 1988–92, the number of stillbirths and deaths in the first week of life per 1,000 total births was 9.8 in Newham compared with 8.2 in England and Wales. The percentage of total residents aged 16 and over who were prevented from working by permanent sickness was 3.9 per cent. in England and Wales but 4.9 per cent. in Newham. The percentage of limiting, long-standing illness among children aged up to four years was 2.7 per cent. in Newham compared with just 1.9 per cent. in England and Wales. Births per 1,000 women aged 15 to 44—this statistic is good news, but it creates considerable work for the health service—were 87.3 in Newham compared with 63.6 in England and Wales.

Alongside that picture of the health service's considerable work load, the resources available to the service in east London are plainly inadequate. According to the Government's 1993 figures, about three quarters of general practitioner premises in Newham are in poor condition. Since then, nothing has substantially—

Mr. Deputy Speaker

Order. This debate is about NHS trusts. It is certainly not about GPs' premises. It is not in order to relate detailed statistics on Newham, important though they are. They need to be related to the Bill or to the reasoned amendment.

Mr. Timms

I am grateful to you, Mr. Deputy Speaker. The possibility of a private finance initiative to raise the standard of GP premises has been considered by one of the trusts in the region, but I take your point. The community health service trust has considered that possibility, but I will endeavour to relate my remarks more closely to the Bill.

As the reasoned amendment sets out, trusts may accrue liabilities in other ways and not simply through the PFI. That is the anxiety to which I want to draw attention. I talked about GPs' premises. The number of dentists and health visitors employed by the community health service trust is small relative to the population.

That is the position today. What worries me is the stress and the despair that I see among some of the people working in those conditions for the health service trusts. This is where I come to the circumstances in which the Bill will apply. The East London and the City health authority faces a large deficit next year just to keep the existing service level going. Estimates of that deficit vary between £7 million and £20 million for the coming financial year. Whatever the figure is, it is certainly a large sum and no one to whom I have spoken in the trusts has the faintest idea how that gap can be bridged. The mood is dark in the trusts that will be on the receiving of the cuts required to bridge that deficit. I would not rule out the possibility of a trust not being able to meet its financial liabilities and running into the situation in which the Bill will apply.

The position is much worse even than that. This is where people start to become angry. The new capitation formula for district health authorities will remove another large sum—in excess of £11 million—from the East London and the City health authority budget. That will be done under the new formula based on work conducted by York university, but significantly changed from what it recommended. It has not yet been implemented, but I understand that it has been confirmed as a direction in which the Government intend to move.

York university was charged with providing a resource allocations formula that reflected need. It did so, but the Department of Health changed it for reasons that have still not been explained, so that the formula no longer reflects need. In the document entitled "The Resource Allocation Consequences of the New NHS Needs Formula", published in May 1995, York university states: In implementing the work, the Department of Health had to make a judgment about which needs index to use for distributing funds not relating to inpatient use. In the event, they have chosen to allocate 64 per cent. of the total budget according to the acute index, 12 per cent. according to the psychiatric index, and 24 per cent. according to no needs index. The report notes that the use of no needs weighting for such a large block of services, which includes community and mental handicap services, can be challenged. It illustrates the importance of the issue by comparing the Department's preferred formula with an alternative, in which the 24 per cent. is allocated using the York acute index. It is found that this option would redirect amounts of up to 5 per cent. away from the home counties towards the inner cities. I am extremely concerned about the fact that that element is not there. Its absence cause serious financial problems for the trusts in east London.

I have corresponded with the Minister about that subject, but, given the problems that are being created, I am still at a loss to understand why the Government are pursuing the use of that formula. I have repeatedly attempted to find out why a formula is being introduced that so dramatically shifts resources away from the trusts, where they are most needed, but I still have not obtained anything like a satisfactory explanation.

The resource allocation formula is wrong. It has the opposite effect to that advertised as the Government's intention. The only explanation for its adoption that I have found is one of partisan advantage, which is disgraceful. The formula needs to be changed radically in line with York university's original proposals, so that it has the effect that the Government claimed to want.

Given the way in which things are going now, it is entirely possible that a trust, or trusts, will find it extremely difficult to meet financial obligations in east London, Manchester, Sunderland and other areas that are particularly badly affected by the formula, and the powers in the Bill will then need to be invoked. If there is no change in the direction in which health service funding is going, we shall very soon find ourselves in the position described in the Bill. That will be to the immense disadvantage not just of people in east London and the other areas most affected, but of the Government.

9.5 pm

Mr. John Gunnell (Morley and Leeds, South)

I can hardly be accused of hostility to the idea of public-private partnership. Let me declare an interest that, for the other purposes of the debate, need not be mentioned: I am chairman of Yorkshire Fund Managers, a joint venture company owned by Yorkshire Enterprise in the public sector and York Trust in the private sector. I have chaired the company for the past six years. The money from the public sector that goes into investments through Yorkshire Fund Managers is far more than matched by money from the private sector. My point is that I am very used to dealing with public-private partnership. As a Leeds Member, let me add that the Leeds initiative has gained a good reputation through its work with the private sector. Partnerships of this kind often make it possible for many things to be done that could not be done in the public sector alone.

The Secretary of State said that people had asked about the fact that those holding his office could still decide at the last minute whether to meet health bodies' liabilities. Why has that question just come to the fore? Why was it not asked of the last Secretary of State, or of the right hon. and learned Member for Rushcliffe (Mr. Clarke)? I think that it has arisen now for two reasons. First, there has been a considerable increase in the number of potential PFIs in the health service. That has always been a possibility, but, as the Secretary of State made clear at Question Time today, he has been signing go-ahead agreements more and more frequently. As the right hon. Gentleman accepted, however, those agreements did not have the signature that would enable the contracts to be let and things to move ahead. Before that could happen, an assurance had to be given to the providers of the money. Haste was therefore necessary. Nevertheless, I do not think that those signatures can be forthcoming until there is a clear understanding of the safeguards that exist on either side.

Secondly, there is the concentration on health finances. Many health service trusts are in the sort of difficulty referred to by my hon. Friend the Member for Newham, North-East (Mr. Timms): they do not know how their ends will be met, and they find that they do not receive a very sympathetic hearing from the Secretary of State.

It would be apposite to illustrate that point from what is happening to health in Leeds. One of the three agreements that have been given the go-ahead by the Secretary of State since the Budget involves St. James's hospital in Leeds. The St. James's and Seacroft University Hospitals NHS Trust is currently in deficit. The Government's attitude to that deficit is not especially sympathetic. My questions arise naturally from that. The Minister may say that there is much difference between capital and revenue but the same considerations arise when the Government's decisions on finance seem to increase, rather than decrease, deficits.

With all the other Leeds Members, I was invited to meet Leeds community health council to discuss that issue last Friday. The hon. Member for Leeds, North-West (Dr. Hampson) attended, with three Labour Members. According to the CHC, the St. James's trust faces a £6 million deficit this year. Not only that, but United Leeds Teaching Hospitals NHS Trust, which covers Leeds general infirmary, faces a £6 million deficit this year. The health authority has a £2 million deficit. Leeds is £14 million in deficit, according to the CHC.

Naturally, after such a meeting, one tries to check the figures. I found that the health authority was talking about a large deficit. It expected a deficit at Jimmy's of more than £1 million and a larger figure of £7 million at the Leeds general infirmary. The total figure was not so different from that of the CHC. It went further in talking about the deficits expected next year. Knowing the sums allocated by the Government for health in Leeds for the next year, it expected a deficit of nearly £5 million for St. James's and about £10 million for the LGI. Those are serious deficits.

Everything comes back to the way in which the Government have allocated health resources. Their use of the formula, as was demonstrated by the York economists, has acted against cities. That decision has resulted in a massive transfer of funds from cities where there is real and pressing need to areas where the need is not so demonstrably large, though I believe that health service funds are needed everywhere.

The hospital trusts and the health service in Leeds are penalised by the way in which the Government have allocated funds. In response to that, the Conservative party and Ministers have not recognised that, for Leeds as a whole, an estimated £18 million shortfall has been caused by that decision. Instead, they say that Leeds is overspending by £3.1 million. There is a difference of some £21 million between the Government's thinking and that of people who work in the health service in Leeds about the funding that the city needs. Under those circumstances, it is not surprising that people would wish us to hesitate before underwriting the money that is to be allocated for such projects.

I am told that it is hoped that the St. James's project contract will be signed in April. In those circumstances, it would be the first scheme to go ahead. I recognise that some of the facilities will benefit some of my constituents, so I hope that the scheme goes ahead. I accept that it will benefit the public of Leeds as a whole, so I wish it well. One improvement that will help my constituents is that 166 of the 246 extra beds will be available in the public sector.

Let us consider some of the conditions that my hon. Friend the Member for Peckham (Ms Harman) says should apply to public-private partnerships. First, the health service must be run by the NHS; secondly, private finance must be in partnership with public finance; thirdly, the public sector must set the priorities in the public interest.

The St. James's scheme meets some of those conditions, but a number of important questions remain. What happened to the original scheme for the development at St. James's? I was a member of the Leeds health authority before coming to the House; I was also a member of the local council. The health authority asked me to approach the local authority because the city council owned a great deal of land around the St. James's site. I played a minor part in the negotiations that eventually led to the transfer of 13.5 acres of land to the hospital trust.

The PFI uses that very land. The press release that accompanied the announcement about the transfer made it clear that the local authority played a key role throughout. It was right that the local authority should make that land available. However, I remember that when I was first asked to approach the city council the primary uses for the land were intended to be for a car park and a nurses' home. The car park project still exists, but can the Minister tell me what happened to the nurses' home?

I want the Minister to give me an assurance about the development. When the general public go to St. James's, the worst aspect for them is that it is almost impossible to park. It is sometimes an advantage to be a Member of Parliament as it enables me to park at St. James's hospital. That gives me an advantage when I want to nip in and see my constituents. The public complain bitterly about the car parking problem.

I want to be sure that if the private sector is involved in providing the car park, the parking charges will not be such that my constituents will not be able to afford to park when they visit their relatives. I am, of course, referring to those of my constituents who can manage to get to the hospital by private transport; large numbers of them cannot do so. We do not expect the parking to be free, but the charge should not be greater than they would pay in a small city council car park outside the hospital.

Mr. Deputy Speaker

Order. I am having enormous difficulty relating car parking charges to the Bill, but perhaps it will all become clear in a moment.

Mr. Gunnell

It is clear, Mr. Deputy Speaker, because the scheme will, rightly, go ahead—yet there are still questions to ask about the financing of it.

I shall rapidly move away from that subject and raise one or two other issues. I would like to be sure that safeguards are in place. I believe that the hon. Member for Worcester (Mr. Luff) got it wrong. He said that this is a Bill in which the risk is borne by the private sector, not by the public sector. It is obvious from what the Secretary of State for Health said that the public sector carries the risk. What will happen if something goes wrong with the private sector partners who are involved in this project? If the private sector partners go bust, will the Secretary of State bail them out as well?

If there is a hospital and part of it is private and part of it is public, what conditions will apply to the staff? Morale is already at a low ebb among staff in the health service, and I would not like to think that there would be two sets of staff with different sets of conditions of service—so that some are seen to have a more privileged position.

I am disappointed that some facilities will not be available to most of my constituents. If the private sector is involved in the scheme, it will want to get something out of it. We have to be careful to keep that well under control, to ensure that any scheme that goes ahead has a strong net benefit to the public sector and to ensure that it is genuinely carried out at a lower cost than the public sector would be paying if it were getting that same benefit by going it alone.

9.21 pm
Mr. Kevin Barron (Rother Valley)

Today's debate has exposed the shambles that the Government have made of their attempts to privatise parts of the national health service. Successive Secretaries of State have promised us newer, bigger and better hospitals; they have promised us faster and more efficient services; and they have assured us that the Conservatives have a gleaming vision for an invigorated, market-managed, private sector-controlled national health service. However, the words of the Tories—and of the Secretary of State today—have been shown for what they are: hollow, empty promises. An endless stream of broken promises has brought the Secretary of State to the House today with this Bill.

My hon. Friend the Member for Peckham (Ms Harman) detailed those broken promises: Norwich, Carlisle, Swindon, Durham and others have been waiting years for new hospital buildings. They have been promised by the Government but have been continually delayed. The Secretary of State for Health spoke at the Royal College of Physicians on Tuesday 21 November 1995, and I shall quote from part of his speech: Every part of the country has its own story of a new facility that has been promised and planned and then delayed, mangled and often cancelled. Too many NHS hospitals bear the scars of this haphazard process". Perhaps the Secretary of State would like to reflect on his words at that conference—they describe exactly the shambles that he has created with the private finance initiative in the health service. When he used those words, he claimed that he was painting a picture of public sector capital planning, but he must see that they apply fully to the situation that he has brought before the House today.

The Secretary of State for Health and the hon. Member for Aylesbury (Mr. Lidington) quoted what I said at a conference of the Association of the British Pharmaceutical Industry earlier this year. I shall give hon. Members the benefit of the doubt because it is quite clear that the Central Office brief used only a small part of my speech in relation to what I said about PFI. I should like to put what I said at the conference in context. I said: We do not disagree with PFI—how could we? It was Labour who first thought of partnerships between the public and private sector. We argued that it would enhance investment because of the long-term inability of governments to maintain capital investment". I then said—this is the section that was missed out in the Smith square brief: But what the Conservatives are attempting is to replace capital investment with PFI. The Budget produced a 17 per cent. cut in the NHS capital programme. The Secretary of State believes that private finance will fill this gap. But, to do so, there needs to be—in one year—a massive 242 per cent. increase in private money poured into the NHS. Given the history of PFI in the Health Service, can we really expect that to happen? The answer to that question is no, we cannot expect that to happen. That is what is behind it. The Government have forgotten that the private sector is not as unconnected from reality as they are. The private sector has realised what the Department has failed to acknowledge since the very first day that it set the internal market in train: that the so-called NHS reforms, and specifically the internal market, are incoherent, ill thought out, ineffectively planned and incompetently implemented.

Today, the Secretary of State has placed before the House a Bill to revise those reforms, rewrite the past and reinterpret his role. That has been the most striking feature of the Secretary of State's tenure at the Department. He has attempted to retell the story of the Conservative Government's fragmentation of our national health service, with himself as its saviour, although he fails to mention that he is trying to save the NHS from the Tory Government of whom he is a member.

The Bill is not about trying to make this discredited Government look good on health by claiming to care; it is about patching up another hole in the NHS framework that the Government have created. Because there is no guarantee within the national health service framework that it will be paid, the private sector will not bail out the Government in their failed PFI policy so, in a classic piece of double-think, the Government are bailing themselves out by guaranteeing the payments that it needs to survive. It is like someone jumping out of a crashing aeroplane to keep the plane aloft and save themselves from death.

At least the hon. Member for Worcester (Mr. Luff) had the courage to say what the Bill was about; the Secretary of State avoided doing so.

My hon. Friend the Member for Peckham rightly said that the Bill had not been thought out. The fundamental purpose is not, as the Secretary of State claimed, a minor revision of already followed practices. It is not a Bill to clear up an anomaly in law. Patching up another hole in the NHS framework means undermining many principles that the Government claim to be sacred. The Bill would fundamentally alter the basis on which the Department and the public purse take on liabilities. It would expose the public sector to as much as £5 billion of liabilities, which the Secretary of State would have no way of controlling.

The House has been asked to pass a Bill giving the private sector the right to charge the national health service as much as £5 billion for its services, safe in the knowledge that it could bankrupt NHS trusts and still get its money back.

Mr. Horam

indicated dissent.

Mr. Barron

I am willing to give way on that point, because the Secretary of State said earlier that trusts can borrow without his consent. It is my contention that that is at the back of this.

The Secretary of State is asking the House to underwrite £5 billion of private sector contracts without any Minister having a say in what the contracts are for or what they contain. The Bill spends public money without public accountability. No Minister would have a right to control the mounting liabilities that the Bill might create. Ministers get no say in writing the contracts; they write the cheques only if those contracts go wrong.

That is not what the private finance initiative in the national health service was designed for. That is not what Ministers told the House and the country that the PFI would do. When the national health service executive wrote last year to pass on the ministerial diktats on PFI, it did not say to the trusts, "Spend as much money as you like; enter any crazy contract you wish; the Government do not need to know. We shall just bail you out if you make that decision." Instead, on 20 March 1995, the NHS executive said: A fundamental principle of the PFI is transfer of risk to the private sector. This Bill does exactly the opposite. It makes contracting in the NHS under the PFI totally gilt-edged and absolutely risk free.

The NHS guideline notes on the PFI were specific. They detailed, in a headline style, 20 ways in which to transfer risks. The notes said: In many cases, the private sector should be able cost-effectively to assume the entire responsibility for the first ten risks, while taking a substantial share of the rest. Some of the risks identified were: construction cost overruns; losses caused by late completion; costs of correcting defects; maintenance and repair costs; failed income generation schemes; failure to meet targets; losses through inefficiency and competition; higher than expected running costs; losses from unexpectedly low resale values. The list goes on. If this Bill is passed, that list of possible risks will be transferred not to the private sector but to the Secretary of State.

How does the Minister who will make the winding up speech hope to reconcile the Bill's purpose with the Secretary of State's comments to the Royal College of Physicians in November last year, when he said: We seek a risk-bearing partnership with the private sector which allows a proper return to the successful partner, but expects the unsuccessful partner to carry his proper share of responsibility. Where is the responsibility if we say that the British taxpayer, without taking a part in the decision, can write off any liabilities that are entered into? There is none.

My hon. Friend the Member for Carlisle (Mr. Martlew) said that there is no risk, and he is absolutely right. In Carlisle, a hospital that was promised years ago has been slowed down by the PFI, and any risk that was to be taken by the private sector will now be written off. I must commend his speech. I also looked at the soccer results before I came back into the Chamber, and Rotherham United have beaten Carlisle 2–0 tonight. We will be going to Wembley on 14 April. Their team made it last year, so we are sharing in the success.

This Bill ends risk-bearing by private contractors. Their bills are guaranteed to be paid, no matter how badly they have designed, built, financed or operated the contracted duties. Trusts could be falling over people offering to contract with them. Conceivably, a contract could be presented to build a new facility for free, a few cost overruns could be dropped in and then the contract could be laid on the Secretary of State, who would pick up the tab.

Mr. Dorrell

That is not true.

Mr. Barron

That is true; the right hon. Gentleman did not explain any of that when he opened the debate. This Bill is nothing more than a charter for cowboys, who could use it to milk the British taxpayer through the NHS.

The Bill is a cynical measure. It has been designed so that, in the run-up to the general election, the Secretary of State and, perhaps, the Prime Minister can be seen walking around building sites, promising new hospitals for all. In this debate we have heard about the six years that people in Norwich have had to wait, and they still do not know if there is an agreement. Ministers know full well, as does the House, that they will be exposing us—

Mr. Patrick Thompson (Norwich, North)

Will the hon. Gentleman give way?

Mr. Barron

The hon. Gentleman has just dropped down out of the Gallery.

Ministers will be exposing us to a possible £5 billion worth of debt, over which the Secretary of State will have no control at all.

Mr. Thompson

I am conscious of the fact that I have not been present through all the debate, but references to Norwich should be accurate. The long delays in the Norwich hospital have been due to changes of mind on the siting of the hospital and have nothing to do with the PFI. I hope that the hon. Gentleman will persuade members of the Labour party to stop campaigning for alternative sites, because that will cause further delay. He should concentrate on matters that he knows something about.

Mr. Barron

I am pleased that I gave way to the hon. Gentleman, because he is using the same logic as that used by the hon. Member for Worcester (Mr. Luff), who argued that the Worcester hospital has been delayed for the past two years because of our amendment.

The hon. Member for Norwich, North (Mr. Thompson) should have been here earlier to hear my hon. Friend the Member for Peckham read out a press release that was produced by the Department of Health in 1990. The then Secretary of State read out the press release and spoke of the great things that were to happen involving the new hospital in Norwich. It is a pity that the hon. Gentleman was not here to hear that.

Many people are concerned that the PFI is nothing more than a ramp for privatisation, and those concerns are heightened by the overarching secrecy that surrounds the PFI. The Secretary of State smiles, but many clinicians inside the NHS fear that the decisions that they take now will not be taken if other people, who put the concrete in the hospitals, also run and manage the services. The Secretary of State knows that that is the case because it is well documented. That is why the right hon. Gentleman says that the Government will never do anything unless clinicians say that it is all right to do so. He knows that he ignored those same clinicians when they wrote to him to say that he should not reorganise the National Blood Authority.

The Bill commits the House to supporting debt resulting from contractual obligations about which we can discover nothing. Secrecy and mystery surround every turn of the PFI process. When I recently received some information from one hospital trust about the PFI, the paper came in marked "confidential" and its recipients were sworn to secrecy about its contents. The document contained nothing more exciting than a budget for running the PFI process. That budget is commonly acknowledged to be in the region of £1 million a time.

The greatest secrecy surrounding PFI is that nobody knows where the boundaries are. At last month's health questions I asked the Secretary of State to tell the House which services were clinical services—and therefore need not go out to PFI—and which were clinical support services. He said that the clinical and clinical support services were both well-known terms of art within the health service. The scope of those terms is well defined."—[Official Report, 13 February 1996; Vol. 271, c. 794.] He should remember that occasion as I wrote to him two days later and asked him to define the terms. I thought that the House would appreciate a list stating which services were clinical and which were not. In view of what he had said, I thought that my request was reasonable, but one month has passed and my postbag remains singularly empty of correspondence on that matter from the Secretary of State. Perhaps he will answer the letter and tell me exactly what he means when he talks about PFI in the health service.

Is it true that nothing is outside the scope of the PFI and literally everything is up for grabs? If so, I believe that the House will take a dim view of the privatisation of clinical services with a cast-iron guarantee of return from the Government. Clinicians are already worried that their service will be privatised and the Bill will not ease their concerns.

Contractors are worried that they will not get paid if the Secretary of State does not change more NHS regulations. The Bill is designed to make them feel better. Contractors and private sector consortiums fear that they are being asked to sign agreements with weak and insubstantial NHS trusts.

The Government's health service reforms have created organisations that the Secretary of State can dissolve almost at will; they lack accountability to their communities and to Parliament. The reforms have created trusts that operate without effective forms of control; they are able to borrow without the statutory approval of the Secretary of State. The private sector fears that the agreements entered into with the trusts will not be safe. Banks fear losses and the insecurity caused by the continual upheaval in the NHS brought about by the internal market.

There are also Government fears: Ministers fear that their reforms have created a monster that they cannot control. They fear that they have built a system that stands permanently on the point of collapse, which is exactly what they have done. The Government fear the electoral annihilation that awaits them and Ministers fear voters far more than any concerns about the massive increase in public borrowing that the Bill could bring about.

The Labour party cares about the public purse and public borrowing, which is why we shall vote for our reasoned amendment. As my hon. Friend the Member for Peckham said earlier, we cannot support the Second Reading of the Bill because it commits the taxpayer to signing a blank cheque for as much as £5 billion over which the Secretary of State has no control. It is a badly thought-out Bill that is being rushed through the House by a scared Government who are unable to cope with the chaos that they have created in the national health service.

It is inconceivable that the so-called anomaly has only now come to the Department's attention. Newchurch and Co.—the official guardians of the PFI in the health service—recognised in autumn 1994 the problems created by the Government's haphazard and incoherent trust system. It questioned the implications of the dissolution of a trust and said: The rights of contractors in the event of default by an NHS trust is an issue of concern to many. It is quite clear that the Government have resisted changing the law at least since 1994. One might think that the issue was not keeping the Secretary of State awake at night until two weeks ago when he telephoned my hon. Friend the Member for Peckham. The Government have known about the anomaly for a long time and their best effort ignores their own logic. Newchurch consultants have long recognised—as they say in their "Guide to the PFI"—that In all but the most exceptional circumstances, capital sourced from the private sector is going to be more expensive than money provided by Her Majesty's Treasury". The Secretary of State has admitted that it is perfectly true that capital always costs more in the private sector than it does in the public sector. In his speech to the Royal College of Physicians, he said: I am strongly in favour of testing public and private sector solutions and adopting the approach which offers best value". We agree entirely with best value, but we remain unconvinced that worst value can be underwritten by the Bill and that the Department of Health does not have to take a decision about it.

We tabled the amendment because we are concerned about the state of the national health service. We do not believe that the PFI is any substitute for the public investment that was cut by 17 per cent. in the last Budget. If the PFI is to apply to the health service, it should be on the basis that it is additional and that it will do what it is supposed to do. Dozens of hospitals that should have been built—some of them years ago—remain on the architects' drawings boards because of the Government's belief that the private sector is always the way to go. We do not believe that that is correct in all circumstances. [Interruption.]

The Secretary of State sits there heckling with his feet up. He should start doing his job: he should come to the Dispatch Box and, instead of being flip, tell us the real consequences of the legalisation that he introduces in this place. I ask my hon. Friends to join me in the Division Lobby tonight in order to begin to sort out the mess that the Government have made.

9.42 pm
The Parliamentary Under-Secretary of State for Health (Mr. John Horam)

I am somewhat disappointed by the efforts of Opposition Front-Bench Members in the debate. I am aware that the hon. Member for Peckham (Ms Harman), following the rumpus surrounding her decision to send her son to an excellent school in my constituency—I have not had the opportunity to congratulate her on her excellent choice; Bromley is renowned for its hospitals as well as its education facilities—

Mr. Deputy Speaker (Sir Geoffrey Lofthouse)

Order. The Bill is about the Health Service and not schools.

Mr. Horam

I congratulate the hon. Lady, and I know that she will accept it in good heart. Following the rumpus surrounding her decision, she no doubt wanted to show her mettle and prove that she is not a liability to the Opposition Front Bench.

Mr. McLeish

It was an excellent speech.

Mr. Horam

The hon. Gentleman may have thought so, but I am not sure that that is the consensus in the House. The hon. Lady was rather unwise to take such a strident line with regard to the Bill. It is clearly a responsible measure—any objective observer would regard it as the ultimate in responsibility. It is a Bill of probity. The Bill will save the taxpayer far more money than the largesse to which the hon. Lady referred. I know that the Opposition are rather more casual in their regard to money than we are, but the Bill will save the taxpayer a great deal of money.

Rev. Martin Smyth (Belfast, South)

I appreciate the Minister giving way. I understand the point that he is making, which relates to the national health service. Just a few weeks ago, we were informed by the Minister responsible for health in Northern Ireland that, because of its confidential nature, he could not give us advance notice of a similar measure relating to Northern Ireland. He went on to say that it would be dealt with by negative resolution. Yet there is doubt as to whether it could meet the Privy Council calendar and take effect at the same time as the Bill.

Would it be possible, even at this late stage, for the legislation to cover the national health service in Scotland and Northern Ireland, bearing it in mind that there is a wry expression on the faces of people in Dungannon, where a private finance initiative that was prepared to invest in a magnetic resonance imaging scanner was turned down?

Mr. Horam

The commencement of the Bill is a separate matter, but I have heard what the hon. Gentleman said, and no doubt my right hon. Friend the Secretary of State will ensure that the matter is dealt with sensibly and properly at the appropriate time.

I wonder whether the hon. Member for Peckham really understands the line that she has taken. Once again, she said that the PFI is about privatisation and that she is opposed to it, unlike many of her hon. Friends, including the Leader of the Opposition and the hon. Member for Rother Valley (Mr. Barron), until his rather dutiful retraction during his closing remarks. I was rather sorry that he had to explain away his words.

The Opposition are not clear where they stand. We are uniformly and unilaterally united in favour of PFI, while they cannot make up their mind. They use weasel words about private and public partnerships. At least the hon. Member for Morley and Leeds, South (Mr. Gunnell), in an excellent speech, made it perfectly clear that he understands what the Bill is about, and I hope that he will join us in the Lobby tonight.

Mr. Keith Bradley (Manchester, Withington)

Will the Minister give way?

Mr. Horam

No. The Opposition are unclear as to whether they are opposed to the PFI, half-heartedly in favour of it or wholly in favour of it.

Unusually, the Opposition's health spokesmen wish to put the Department of Health in a worse position than other Departments. As was pointed out in the Financial Times this morning, the Bill seeks to create a level playing field. The Health Department is currently in a worse position than other Departments in regard to raising private money, precisely because of existing legislation.

Ms Harman

Whose legislation?

Mr. Horam

The legislation goes back to 1977 and 1948, so we cannot make it a party political matter.

The Bill creates a level playing field. The hon. Lady, as Opposition health spokesman, is prepared to place the Health Department in a worse position. She has not understood that—perhaps she did not read the Financial Times this morning—but she is prepared to accept it. I understand that she does not want to build more hospitals through the use of private finance in the same way as we do, but it is extraordinary that she wishes to disadvantage health in relation to other areas of spending such as education. The hon. Lady has got herself into an extraordinary position in opposing the Bill.

Finally, the hon. Lady said that a threat hangs over the hospitals as a result of the PFI, yet she plans to vote against the Bill. If there is a threat hanging over hospitals, the Bill provides exactly the way to remove it. Again, the Opposition are in a total muddle.

Mr. Bradley

Will the Minister give way?

Mr. Horam

No. I have very little time.

The Opposition take a contradictory position. Members of Labour's Front-Bench team hold about three different positions, as between their leader and senior and junior health spokespersons. The Opposition accuse us of being in a shambles, but their position is a total mess.

Mr. Bradley

Will the Minister give way now?

Mr. Horam

No, because the hon. Gentleman did not take part in the debate.

Mr. Deputy Speaker

The Minister has made it clear that he will not give way.

Mr. Horam

I am sorry if I cannot deal with all the points made in the debate, but there were several speeches, and a number of them were in similar vein. My hon. Friend the Member for Aylesbury (Mr. Lidington) made an excellent speech.

Mr. Galbraith

No, it was not.

Mr. Horam

Perhaps the hon. Gentleman did not hear my hon. Friend, but I thought that his speech was excellent. He pointed out again that the Opposition have not committed themselves to an increase in resources. This Government committed themselves to increasing resources in real terms and fulfilled that commitment. The Opposition have yet to make any kind of commitment. The hon. Member for Peckham cannot wriggle out of her remarks about resources. It is particularly ironic, after all the fuss that Labour made after the previous general election, that the Opposition will not budge on resources. That is most telling.

My hon. Friend the Member for Aylesbury thought that there was a difference between finance leasing and an operating lease, which he wanted me to explore, and I shall do so. He conceded that much would depend on whether accountants could be made to agree. That is a rather different matter. I do not know about making lawyers or economists agree, but making accountants agree would certainly be extremely difficult.

The speech of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) had all the hallmarks of Victorian melodrama. I am fond of the hon. Gentleman—he certainly adds colour and life to the House.

The Parliamentary Under-Secretary of State for Health (Mr. John Bowis)

Or to the Hackney Empire.

Mr. Horam

My hon. Friend took the words out of my mouth. The hon. Gentleman's speech would have been good for the Hackney Empire. It was a Grand Guignol speech.

The hon. Gentleman was rightly concerned about fiscal probity. As a former member of the Public Accounts Committee, so am I, and certainly I do not run second to the hon. Gentleman in that matter. He can be assured that the Bill enhances the fiscal probity of the PFI and the NHS.

Ms Harman

Will the Minister give way?

Mr. Horam

No, because I have not had a chance to get into my speech. I have 10 minutes left. No, nine minutes. Good heavens—that is ridiculous.

Ms Harman


Mr. Deputy Speaker

Order. The Minister has made it clear that he will not give way.

Mr. Horam

There is also a convention that a Minister who is winding up after a seven-hour debate comprising as many speeches as we have heard today is allowed some time to reply to points made from all parts of the House. It is absurd of the hon. Lady, having made a 40-minute speech, to expect to intervene again.

My hon. Friend the Member for Gravesham (Mr. Arnold), who could not remain for the end of the debate, and my hon. Friend the Member for Dartford (Mr. Dunn), made points about hospitals in their constituencies. They understand my position and know that we are making good progress.

The hon. Member for Southwark and Bermondsey (Mr. Hughes) made a telling and thoughtful intervention. He suggested as an alternative to the Bill an insurance premium, providing for payment in the case of default. I believe that the hon. Gentleman understands that money taken as insurance premiums from solvent trusts would reduce the money available for health care. He said that he supported the principle of the Bill, in the sense that the Government should be responsible for the way in which they conduct their business. Curiously, he went on to say that he could not support this particular Bill because he did not feel that we would test value for money in a suitable way. He is wrong. The whole point of the PFI is that it tests value for money against the public alternatives.

Mr. Simon Hughes

Will the Minister give way?

Mr. Horam

No, I am not giving way because I have only six minutes left.

Public will be tested against private, and if private finance does not win, public finance will be used. That is the exact test that the hon. Member for Southwark and Bermondsey wanted. He made an important point about how far the Bill would fill in the hole created by the withdrawal of capital funding from the public sector. He is right to point out, and my right hon. Friend the Secretary of State agreed, that there is some withdrawal, for the year starting in April, from the capital fund for hospital provision. But there will be a huge increase of £1.3 billion in current spending, and even the hon. Gentleman must admit that all that money comes from the public sector.

We have been able to increase spending by so much—for nurses, doctors and health care—simply because we have made a much smaller reduction in capital funding. That small reduction has been partly covered by receipts from land sales, as well as by PFI investment, and there will be a huge overall increase in spending next year and a tiny decrease in public funding for the capital sector. The hon. Gentleman's point is, therefore, not really relevant.

I return to the speeches of Opposition Front Benchers. [Interruption.] Good heavens, I have only five minutes left. The hon. Member for Peckham claimed to make five points in her speech. I counted only four, so five was an exaggeration. She said that my right hon. Friend the Secretary of State had broken all the promises on hospitals. I know of no major delays in projects currently being implemented since the PFI arrangements were put in hand.

Mr. Martlew

Will the Minister give way?

Mr. Horam

No. Carlisle hospital is a good example of a hospital that has been built in stages. Stage 1 was completed in 1975, and nothing has been done since then. That is the reality of hospital building before the PFI—delay after delay, and stage 1, stage 2 and stage 3. Under the PFI, there will be no delay and we can build a hospital in one go. Nor should there be any delay, because the PFI exercise can be done in the same time and in the same way as going through a full business case. There would be no reason for any delay, and there has been no serious delay as a result of the PFI.

My hon. Friend the Member for Norwich, North (Mr. Thompson) made it clear in his intervention that Norwich hospital had suffered no delay as a result of the PFI. The hon. Member for Rother Valley mentioned North Durham hospital. The PFI has caused no delay for North Durham hospital.

Mr. John Garrett (Norwich, South)

Will the Minister give way?

Mr. Horam

No, I have only three minutes left.

Mr. Deputy Speaker

Order. I repeat that the Minister has made it clear that he is not giving way.

Mr. Horam

The hon. Member for Peckham also made the tired claim that the PFI was a Trojan horse for privatisation. She had to go as far as Stonehaven in Scotland to produce one example that looks remotely like privatisation. Even that example is not privatisation of the clinical sector, but a perfectly sensible arrangement that the clinicians support.

The hon. Lady went on to try to link privatisation with market testing. Again, the Opposition are entirely wrong. Market testing has saved the taxpayer hundreds of thousands of pounds. A billion pounds in total has been saved by the health service by contracting out services, and that is a good example of the private sector bringing its skills to bear to improve the performance of health care.

The hon. Lady's final point—her coup de grâce—amounted to a ludicrous claim that this all means a blank cheque for £5 billion—as if there were no external financing limit, no quarterly reporting, no balance between receipt and revenue. The fact is that the Opposition's reasoned amendment is a nonsensical sham. It is wholly without substance, and it should be defeated.

Question put, That the amendment be made:—

The House divided: Ayes 264, Noes 295.

Division No. 75] [9.59 pm
Abbott, Ms Diane Cox, Tom
Ainger, Nick Cummings, John
Ainsworth, Robert (Cov'try NE) Cunliffe, Lawrence
Allen, Graham Cunningham, Jim (Covy SE)
Anderson, Donald (Swansea E) Cunningham, Rt Hon Dr John
Armstrong, Hilary Dafis, Cynog
Ashdown, Rt Hon Paddy Darling, Alistair
Ashton, Joe Davies, Bryan (Oldham C'tral)
Austin-Walker, John Davies, Chris (L'Boro & S'worth)
Barnes, Harry Davies, Rt Hon Denzil (Llanelli)
Barron, Kevin Davies, Ron (Caerphilly)
Battle, John Davis, Terry (B'ham, H'dge H'l)
Bayley, Hugh Denham, John
Beckett, Rt Hon Margaret Dewar, Donald
Beith, Rt Hon A J Dixon, Don
Bell, Stuart Dobson, Frank
Benn, Rt Hon Tony Donohoe, Brian H
Bennett, Andrew F Dowd, Jim
Benton, Joe Dunwoody, Mrs Gwyneth
Bermingham, Gerald Eastham, Ken
Berry, Roger Etherington, Bill
Betts, Clive Evans, John (St Helens N)
Blunkett, David Fatchett, Derek
Boateng, Paul Faulds, Andrew
Bradley, Keith Field, Frank (Birkenhead)
Brown, Gordon (Dunfermline E) Fisher, Mark
Brown, N (N'c'tle upon Tyne E) Flynn, Paul
Bruce, Malcolm (Gordon) Foster, Rt Hon Derek
Burden, Richard Foster, Don (Bath)
Byers, Stephen Foulkes, George
Caborn, Richard Fyfe, Maria
Callaghan, Jim Galbraith, Sam
Campbell, Mrs Anne (C'bridge) Galloway, George
Campbell, Menzies (Fife NE) Gapes, Mike
Campbell, Ronnie (Blyth V) Garrett, John
Campbell-Savours, D N George, Bruce
Canavan, Dennis Gerrard, Neil
Cann, Jamie Gilbert, Rt Hon Dr John
Chidgey, David Godman, Dr Norman A
Clapham, Michael Godsiff, Roger
Clark, Dr David (South Shields) Golding, Mrs Llin
Clarke, Eric (Midlothian) Gordon, Mildred
Clarke, Tom (Monklands W) Graham, Thomas
Clwyd, Mrs Ann Grant, Bernie (Tottenham)
Coffey, Ann Griffiths, Nigel (Edinburgh S)
Cohen, Harry Griffiths, Win (Bridgend)
Connarty, Michael Gunnell, John
Cook, Frank (Stockton N) Hain, Peter
Cook, Robin (Livingston) Hall, Mike
Corston, Jean Hanson, David
Cousins, Jim Hardy, Peter
Harman, Ms Harriet Miller, Andrew
Harvey, Nick Mitchell, Austin (Gt Grimsby)
Hattersley, Rt Hon Roy Moonie, Dr Lewis
Heppell, John Morgan, Rhodri
Hill, Keith (Streatham) Morley, Elliot
Hinchliffe, David Morris, Rt Hon Alfred (Wy'nshawe)
Hodge, Margaret Morris, Estelle (B'ham Yardley)
Hoey, Kate Mudie, George
Hogg, Norman (Cumbernauld) Mullin, Chris
Home Robertson, John Murphy, Paul
Hood, Jimmy Nicholson, Emma (Devon West)
Hoon, Geoffrey Oakes, Rt Hon Gordon
Howarth, Alan (Strat'rd-on-A) O'Brien, Mike (N W'kshire)
Howarth, George (Knowsley North) O'Brien, William (Normanton)
Howells, Dr Kim (Pontypridd) O'Hara, Edward
Hoyle, Doug Olner, Bill
Hughes, Kevin (Doncaster N) O'Neill, Martin
Hughes, Robert (Aberdeen N) Orme, Rt Hon Stanley
Hughes, Roy (Newport E) Parry, Robert
Hughes, Simon (Southwark) Pearson, Ian
Hutton, John Pickthall, Colin
Illsley, Eric Pike, Peter L
Ingram, Adam Pope, Greg
Jackson, Glenda (H'stead) Powell, Ray (Ogmore)
Jackson, Helen (Shef'ld, H) Prentice, Bridget (Lew'm E)
Jamieson, David Prentice, Gordon (Pendle)
Janner, Greville Primarolo, Dawn
Jones, Barry (Alyn and D'side) Purchase, Ken
Jones, Ieuan Wyn (Ynys Môn) Quin, Ms Joyce
Jones, Jon Owen (Cardiff C) Randall, Stuart
Jones, Lynne (B'ham S O) Raynsford, Nick
Jones, Martyn (Clwyd, SW) Reid, Dr John
Jones, Nigel (Cheltenham) Rendel, David
Jowell, Tessa Robertson, George (Hamilton)
Kaufman, Rt Hon Gerald Robinson, Geoffrey (Co'try NW)
Keen, Alan Roche, Mrs Barbara
Kennedy, Charles (Ross,C&S) Rogers, Allan
Kennedy, Jane (L'pool Br'dg'n) Ross, Ernie (Dundee W)
Khabra, Piara S Rowlands, Ted
Kilfoyle, Peter Ruddock, Joan
Lestor, Joan (Eccles) Sedgemore, Brian
Lewis, Terry Sheerman, Barry
Liddell, Mrs Helen Sheldon, Rt Hon Robert
Litherland, Robert Shore, Rt Hon Peter
Livingstone, Ken Short, Clare
Lloyd, Tony (Stretford) Simpson, Alan
Llwyd, Elfyn Skinner, Dennis
Loyden, Eddie Smith, Andrew (Oxford E)
Lynne, Ms Liz Smith, Chris (Isl'ton S & F'sbury)
McAllion, John Smith, Llew (Blaenau Gwent)
McAvoy, Thomas Soley, Clive
McCartney, Ian Spearing, Nigel
McCartney, Robert Spellar, John
Macdonald, Calum Squire, Rachel (Dunfermline W)
McKelvey, William Steel, Rt Hon Sir David
McLeish, Henry Steinberg, Gerry
Maclennan, Robert Stevenson, George
McNamara, Kevin Stott, Roger
MacShane, Denis Strang, Dr. Gavin
McWilliam, John Straw, Jack
Madden, Max Sutcliffe, Gerry
Maddock, Diana Taylor, Mrs Ann (Dewsbury)
Mahon, Alice Taylor, Matthew (Truro)
Mandelson, Peter Thompson, Jack (Wansbeck)
Marek, Dr John Timms, Stephen
Marshall, David (Shettleston) Tipping, Paddy
Marshall, Jim (Leicester, S) Touhig, Don
Martin, Michael J (Springburn) Trickett, Jon
Martlew, Eric Turner, Dennis
Maxton, John Tyler, Paul
Meacher, Michael Vaz, Keith
Meale, Alan Walker, Rt Hon Sir Harold
Michael, Alun Wardell, Gareth (Gower)
Michie, Bill (Sheffield Heeley) Wareing, Robert N
Michie, Mrs Ray (Argyll & Bute) Watson, Mike
Milburn, Alan Welsh, Andrew
Wicks, Malcolm Wray, Jimmy
Wigley, Dafydd Wright, Dr Tony
Williams, Rt Hon Alan (Sw'n W) Young, David (Bolton SE)
Williams, Alan W (Carmarthen)
Wilson, Brian Tellers for the Ayes:
Winnick, David Ms Janet Anderson and Mr. Malcolm Chisholm.
Wise, Audrey
Ainsworth, Peter (East Surrey) Curry, David (Skipton & Ripon)
Aitken, Rt Hon Jonathan Davis, David (Boothferry)
Alexander, Richard Day, Stephen
Alison, Rt Hon Michael (Selby) Deva, Nirj Joseph
Allason, Rupert (Torbay) Devlin, Tim
Amess, David Dicks, Terry
Arbuthnot, James Dorrell, Rt Hon Stephen
Arnold, Jacques (Gravesham) Douglas-Hamilton, Lord James
Arnold, Sir Thomas (Hazel Grv) Dover, Den
Ashby, David Duncan-Smith, Iain
Atkins, Rt Hon Robert Dunn, Bob
Atkinson, David (Bour'mouth E) Durant, Sir Anthony
Atkinson, Peter (Hexham) Dykes, Hugh
Baker, Rt Hon Kenneth (Mole V) Eggar, Rt Hon Tim
Baker, Nicholas (North Dorset) Elletson, Harold
Baldry, Tony Emery, Rt Hon Sir Peter
Banks, Matthew (Southport) Evans, David (Welwyn Hatfield)
Banks, Robert (Harrogate) Evans, Jonathan (Brecon)
Bates, Michael Evans, Nigel (Ribble Valley)
Batiste, Spencer Evans, Roger (Monmouth)
Bellingham, Henry Evennett, David
Bendall, Vivian Faber, David
Beresford, Sir Paul Fabricant, Michael
Biffen, Rt Hon John Fenner, Dame Peggy
Body, Sir Richard Forman, Nigel
Bonsor, Sir Nicholas Forth, Eric
Booth, Hartley Fowler, Rt Hon Sir Norman
Boswell, Tim Fox, Dr Liam (Woodspring)
Bottomley, Peter (Eltham) Fox, Rt Hon Sir Marcus (Shipley)
Bottomley, Rt Hon Virginia Freeman, Rt Hon Roger
Bowden, Sir Andrew French, Douglas
Bowis, John Fry, Sir Peter
Boyson, Rt Hon Sir Rhodes Gale, Roger
Brandreth, Gyles Gallie, Phil
Brazier, Julian Gardiner, Sir George
Bright, Sir Graham Gamier, Edward
Brooke, Rt Hon Peter Gill, Christopher
Brown, M (Brigg & Cl'thorpes) Gillan, Cheryl
Browning, Mrs Angela Goodlad, Rt Hon Alastair
Bruce, Ian (South Dorset) Goodson-Wickes, Dr Charles
Budgen, Nicholas Gorman, Mrs Teresa
Burt, Alistair Gorst, Sir John
Butcher, John Grant, Sir A (SW Cambs)
Butler, Peter Greenway, Harry (Ealing N)
Butterfill, John Greenway, John (Ryedale)
Carlisle, John (Luton North) Griffiths, Peter (Portsmouth, N)
Carlisle, Sir Kenneth (Lincoln) Grylls, Sir Michael
Carrington, Matthew Hague, Rt Hon William
Carttiss, Michael Hamilton, Rt Hon Sir Archibald
Cash, William Hamilton, Neil (Tatton)
Channon, Rt Hon Paul Hampson, Dr Keith
Chapman, Sir Sydney Hanley, Rt Hon Jeremy
Churchill, Mr Hannam, Sir John
Clappison, James Hargreaves, Andrew
Clark, Dr Michael (Rochford) Harris, David
Clarke, Rt Hon Kenneth (Ru'clif) Haselhurst, Sir Alan
Clifton-Brown, Geoffrey Hawkins, Nick
Coe, Sebastian Hawksley, Warren
Colvin, Michael Hayes, Jerry
Congdon, David Heald, Oliver
Conway, Derek Heath, Rt Hon Sir Edward
Coombs, Anthony (Wyre For'st) Heathcoat-Amory, Rt Hon David
Coombs, Simon (Swindon) Hendry, Charles
Cope, Rt Hon Sir John Hicks, Robert
Couchman, James Higgins, Rt Hon Sir Terence
Cran, James Hill, James (Southampton Test)
Currie, Mrs Edwina (S D'by'ire) Hogg, Rt Hon Douglas (G'tham)
Horam, John Peacock, Mrs Elizabeth
Hordern, Rt Hon Sir Peter Pickles, Eric
Howard, Rt Hon Michael Porter, Barry (Wirral S)
Howell, Rt Hon David (G'dford) Porter, David (Waveney)
Howell, Sir Ralph (N Norfolk) Portillo, Rt Hon Michael
Hughes, Robert G (Harrow W) Powell, William (Corby)
Hunt, Rt Hon David (Wirral W) Rathbone, Tim
Hunt, Sir John (Ravensbourne) Redwood, Rt Hon John
Hunter, Andrew Renton, Rt Hon Tim
Hurd, Rt Hon Douglas Rifkind, Rt Hon Malcolm
Jack, Michael Robathan, Andrew
Jackson, Robert (Wantage) Roberts, Rt Hon Sir Wyn
Jenkin, Bernard Robertson, Raymond (Ab'd'n S)
Jessel, Toby Roe, Mrs Marion (Broxbourne)
Johnson Smith, Sir Geoffrey Rowe, Andrew (Mid Kent)
Jones, Gwilym (Cardiff N) Rumbold, Rt Hon Dame Angela
Jones, Robert B (W Hertfdshr) Sackville, Tom
Jopling, Rt Hon Michael Sainsbury, Rt Hon Sir Timothy
Kellett-Bowman, Dame Elaine Scott, Rt Hon Sir Nicholas
Key, Robert Shaw, David (Dover)
King, Rt Hon Tom Shaw, Sir Giles (Pudsey)
Kirkhope, Timothy Shephard, Rt Hon Gillian
Knapman, Roger Shepherd, Sir Colin (Hereford)
Knight, Mrs Angela (Erewash) Shepherd, Richard (Aldridge)
Knight, Rt Hon Greg (Derby N) Shersby, Sir Michael
Knight, Dame Jill (Bir'm E'st'n) Sims, Roger
Knox, Sir David Skeet, Sir Trevor
Kynoch, George (Kincardine) Smith, Sir Dudley (Warwick)
Lait, Mrs Jacqui Smith, Tim (Beaconsfield)
Lamont, Rt Hon Norman Smyth, The Rev Martin (Belfast S)
Lang, Rt Hon Ian Soames, Nicholas
Lawrence, Sir Ivan Speed, Sir Keith
Legg, Barry Spencer, Sir Derek
Leigh, Edward Spicer, Sir James (W Dorset)
Lester, Sir James (Broxtowe) Spicer, Sir Michael (S Worcs)
Lidington, David Spink, Dr Robert
Lilley, Rt Hon Peter Spring, Richard
Lloyd, Rt Hon Sir Peter (Fareham) Sproat, Iain
Lord, Michael Squire, Robin (Hornchurch)
Luff, Peter Stanley, Rt Hon Sir John
Lyell, Rt Hon Sir Nicholas Steen, Anthony
MacGregor, Rt Hon John Stephen, Michael
MacKay, Andrew Stern, Michael
Maclean, Rt Hon David Stewart, Allan
McLoughlin, Patrick Streeter, Gary
McNair-Wilson, Sir Patrick Sumberg, David
Madel, Sir David Sweeney, Walter
Maitland, Lady Olga Sykes, John
Malone, Gerald Tapsell, Sir Peter
Mans, Keith Taylor, Ian (Esher)
Marland, Paul Taylor, John M (Solihull)
Marlow, Tony Taylor, Sir Teddy (Southend, E)
Marshall, John (Hendon S) Temple-Morris, Peter
Marshall, Sir Michael (Arundel) Thomason, Roy
Martin, David (Portsmouth S) Thompson, Sir Donald (C'er V)
Mates, Michael Thompson, Patrick (Norwich N)
Mawhinney, Rt Hon Dr Brian Thornton, Sir Malcolm
Mills, Iain Thurnham, Peter
Mitchell, Andrew (Gedling) Townend, John (Bridlington)
Mitchell, Sir David (NW Hants) Townsend, Cyril D (Bexl'yh'th)
Monro, Rt Hon Sir Hector Tracey, Richard
Montgomery, Sir Fergus Tredinnick, David
Needham, Rt Hon Richard Trotter, Neville
Neubert, Sir Michael Vaughan, Sir Gerard
Newton, Rt Hon Tony Viggers, Peter
Nicholls, Patrick Waldegrave, Rt Hon William
Nicholson, David (Taunton) Walden, George
Norris, Steve Walker, Bill (N Tayside)
Onslow, Rt Hon Sir Cranley Waller, Gary
Oppenheim, Phillip Ward, John
Ottaway, Richard Wardle, Charles (Bexhill)
Page, Richard Waterson, Nigel
Paice, James Watts, John
Patnick, Sir Irvine Wells, Bowen
Patten, Rt Hon John Whitney, Ray
Pawsey, James Whittingdale, John
Widdecombe, Ann Winterton, Nicholas (Macc'f'ld)
Wiggin, Sir Jerry Wolfson, Mark
Wilkinson, John Yeo, Tim
Willetts, David Tellers for the Noes:
Wilshire, David Mr. Simon Burns and Mr. Timothy Wood.
Winterton, Mrs Ann (Congleton)

Question accordingly negatived.

Main Question put forthwith, pursuant to Standing Order No. 60 (Amendment on Second or Third Reading), and agreed to.

Bill read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 61 (Committal of Bills).