Private Finance Initiative (Hansard, 31 October 1996)

§ 2. Mr. Waller
To ask the Chancellor of the Exchequer what plans he has to promote private finance projects in the regions. [309]

§ 10. Mr. Thomason
To ask the Chancellor of the Exchequer what are his current priorities for the PFI. [323]

§ The Financial Secretary to the Treasury (Mr. Michael Jack)
I have already taken the private finance initiative roadshows to Birmingham. Wigan, Leeds, Southampton and Belfast and plan to visit the north-east, the south-west and East Anglia in the near future.
My priorities are to build on the £7 billion of PFI projects already agreed, so that public and private sectors continue delivering high-quality services at improved value for money.

§ Mr. Waller
My hon. Friend will be aware of the enthusiasm for the introduction of private sector funding to provide for infrastructure projects. Is he also aware that there is considerable anxiety about the apparently slow speed with which many projects are getting under way? Can he reassure the House that design, build, finance and operate will actually deliver the goods?

§ Mr. Jack
I am grateful to my hon. Friend for articulating the concerns that have been expressed on deal flow in the private finance initiative. The best way to sum up how we have responded positively to that criticism is to tell him that the CBI said recently that our new guidance would improve risk allocation and, most important, cut bidding costs and help to speed up the flow of deals. At a recent conference in London on the private finance initiative, my right hon. and learned Friend announced a number of new documents, including those on standard contract clauses, better costs, project appraisal and other guidance, which we are giving those involved in the projects to help to speed up the deal flow and reduce bidding costs.

§ Mr. Thomason
Can my hon. Friend confirm that the private finance initiative will be fully extended to local government, while at the same time ensuring that the proprieties of public finance are properly observed?

§ Mr. Jack
I am grateful for my hon. Friend's question, since my right hon. Friend the Minister for Local 769 Government, Housing and Urban Regeneration has been speaking today at the city and financial conference in London, where he has been outlining some of the important steps that will open up private finance for local authorities—indeed, £250 billion-worth of support in private finance—such as introducing the ability to run DBFO-type projects.
My hon. Friend asked an intriguing question on propriety. It is very interesting to consider that Lord Clinton-Davis recently said: Labour would look at updating the public sector borrowing requirement regulations for the PFI. If Labour is going to fiddle the PFI figures, perhaps it will fiddle them for everything else.

§ Sir James Molyneaux
Is the Minister aware that his recent visit to Belfast was very much appreciated? Will he and his colleagues consider what further steps can be taken to make the enterprise initiative scheme more effective for, and attractive to, small investors?

§ Mr. Jack
I thank the right hon. Gentleman for his very kind comments about my visit to Belfast. The conference that I attended was extremely good: many people came from all sectors of industry in Northern Ireland, and there was great support for what the PFI can do. I have been lobbied on the enterprise initiative scheme and a number of other matters connected with venture capital as part of the Budget representations that I have personally received.

§ Mr. Sheerman
Will the Minister take a special roadshow to some of this country's universities? As he will know, the last Budget was a disaster for university finances, and universities are struggling. They are very willing to try the PH, but cannot make it work for them. Will the Minister pay special attention to the universities' problems and to how they can use the PH with some success?

§ Mr. Jack
The hon. Gentleman touches on an important point. I attended a major seminar in London towards the back end of last year. It dealt with how we explain the PFI to all those participating in further and higher education. It is interesting to note that my right hon. Friend the Secretary of State for Education and Employment recently opened one of the pathfinder projects for universities and the PFI at Greenwich concerning new student accommodation. There is very considerable interest in that area, and we are certainly working with the Department for Education and Employment to make further progress.

§ Mr. Tracey
Is not encouragement of the extremely useful PFI made so much more difficult by the Labour party's discouragement of the initiative, especially in the national health service? That is surely rather odd, since at least five hospital projects have been brought about through the PFI.

§ Mr. Jack
My hon. Friend is right. Such an attitude is typical of Labour Members. The Opposition Front-Bench spokesmen for health recently tried to mix it on the PFI by suggesting that, in some way, the initiative represented privatisation of the health service—it never has been that, and it never will be. It is about providing better facilities for patients who receive NHS care.
770 My hon. Friend is right to point to what we have achieved. Already, 40 projects of between £1 million and £10 million have signed up with the PR and we are working hard on the five major pathfinder projects for significant hospital development.

§ Mr. Betts
The Chancellor said that £2 billion had been cut out of public expenditure estimates to allow room for PFI projects. Aside from the nonsense of trying to reclassify the channel tunnel link as a PFI scheme, which it never was, will the Minister explain exactly how much has been committed to the PFI this year and how much it is estimated will be committed by the end of the year? Does the Minister accept that there could be a reduction in that £2 billion and that, therefore, the PR has caused a reduction in public services, because the scheme is substitutional, not additional?

§ Mr. Jack
The hon. Gentleman attempts to take our eye off the ball. Table 6.5 in the Red Book suggests that—in addition to our target of £2 billion-worth of private finance deals—the Government have £20 billion-worth of publicly sponsored capital. Some £7 billion-worth of deals have been agreed, and we are working hard to take those on to their next stages.

§ Mr. Nicholls
When does my hon. Friend expect to come to the south-west to talk about the PFI? Before he does so, will he undertake to look at the details of the Dawlish hospital scheme to find out why it has taken so long to finalise the details?

§ Mr. Jack
I cannot give my hon. Friend a precise date for my visit, but I hope very much that it will be before the end of the year. I am aware that the hospital project to which my hon. Friend refers is high on the agenda of other hon. Friends. We are working hard to unblock some of the problems—in Kent, as well as in the west country—to make certain that these important hospital deals can take place. A great deal of work has been done, particularly with the Department of Health and the private finance panel executive, to turn those projects into reality.