Public Sector Projects: Private Funding (Hansard, 12 May 1989)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)
My Lords, the Ryrie rules are obsolete. They were devised in 1981 to apply to nationalised industries. Eight years later most of the industries have been privatised.
In those areas of the infrastructure where the public sector remains the major provider, the Government welcome proposals for private funding as long as they offer better value for money than conventionally financed alternatives. Privately funded projects are taken into account in planning public expenditure. To encourage proposals for new roads my right honourable friend the Chief Secretary has recently promised not to reduce the road programme on a scheme-by-scheme basis to offset privately financed projects.

§ Lord Ezra
My Lords, while the Chief Secretary to the Treasury referred to the road programme in particular, can we take it that this relaxation of the Ryrie rules will also apply to other public sector projects—for example, those undertaken by local authorities, hospitals and schools? Apart from transport, would they cover heating projects concerned with energy efficiency and conservation? This needs to be clearly stated and I wonder whether the Government will so enlighten us.

§ Lord Brabazon of Tara
My Lords, as concerns the public sector and nationalised industries, the Government are happy to approve proposals for private financing of public sector projects provided they offer better value for money than the publicly funded alternative.

§ Lord Northfield
My Lords, I declare an interest in companies that want to undertake some of this work. May I press the noble Lord for a full statement about the total effects of this relaxation? Is he aware that the announcement was made by the Chief Secretary to the Treasury in a speech outside Parliament? Apparently all we can get hold of is a press release of that speech. This is a matter of great importance to private enterprise companies interested in this work. Should there not be a fully considered statement to Parliament with copies placed in the Library and elsewhere so that companies will know the guidance which they must follow?

§ Lord Brabazon of Tara
My Lords, I shall endeavour to see whether I can place a full copy of my right honourable friend's speech in the Library. A Green Paper on private finance for roads will be issued shortly.

§ Lord McIntosh of Haringey
My Lords, is there not a great and deplorable contrast between the relaxation of the rules for the central government public sector and the increasing tightening of the rules for local government which will be intensified in the Local Government and Housing Bill now before another place?

§ Lord Brabazon of Tara
My Lords, we are talking here about the Ryrie rules, which are now obsolete. They were a source of confusion and policy has moved on since 1981. That is why they have been retired. As for the comparison between financial constraints on local authorities, I am not certain that I can answer that question on this occasion.

Lord Bruce of Donington
My Lords, the noble Lord has said that the rules are now obsolete. Is he aware that the rules have been ridiculous from the beginning and are partly responsible for underinvestment in the nationalised industries over the years since they have been in operation?

§ Lord Brabazon of Tara
My Lords, in that case the noble Lord must be pleased that they have now gone.

§ Lord Northfield
My Lords, in his replies the noble Lord has referred only to the roads programme. The 868 noble Lord, Lord Ezra, asked about a number of other areas in which the relaxation of these rules may apply. May we know, and does the speech to which the noble Lord referred indicate, whether the relaxation goes wider than the roads programme?

§ Lord Brabazon of Tara
My Lords, I have already answered that question by saying that outside the roads programme—in the nationalised industries and the public sector—the Government would be happy to approve proposals for private financing of public sector projects provided of course that they offer better value for money than the publicly funded alternative.

§ Lord Ezra
My Lords, in considering projects of this kind in the future will the Treasury still be taking the line that the cheapest way to raise money is for it to do so in the public sector? Is this not regarded as the biggest inhibitor to private funds being put into public projects?

§ Lord Brabazon of Tara
No, my Lords, the first and foremost principle is that private finance for a project is justified if, and only if, it provides the best value for money. Secondly, the Government need to take into account the existence of privately financed projects in their public expenditure planning. However, the most important thing is value for money.

§ Lord McIntosh of Haringey
My Lords, has the Minister any idea how much more private finance of the water industry will cost the taxpayer and water consumer as opposed to public finance?

§ Lord Brabazon of Tara
My Lords, noble Lords have taken a long time discussing the water industry in the past few days and will no doubt take quite a time longer. The noble Lord will have the opportunity to ask that question then.