Public Services (Hansard, 12 November 2001)

§ Viscount Goschen
asked Her Majesty's Government:
What role they envisage for the private sector in enhancing the delivery of public services.

§ The Minister for the Cabinet Office and Chancellor of the Duchy of Lancaster (Lord Macdonald of Tradeston)
My Lords, the Government are determined to improve the delivery of public services. In the right circumstances, involving the private sector brings innovation and new management expertise to the delivery of good quality public services. Furthermore, one of our principles of reform is to create more choice for customers of public services with the option, if provision falls below acceptable standards, to have alternative services whether from other public service providers, from the private sector or indeed from the non-profit making voluntary sector.

§ Viscount Goschen
My Lords, how does the Minister reconcile the ambitions given in his Answer to enhance the use of the private sector with the reality of the critically damaged reputation that the Government now have with it, following their action to force one of their largest private sector partners—Railtrack—out of business and to bypass the statutory regulator 364 entirely? Is not the inevitable consequence of this action that all future PPP projects will be more difficult to execute and will command a higher regulatory risk premium, making them much worse value for the taxpayer?

§ Lord Macdonald of Tradeston
My Lords, the Secretary of State, Stephen Byers, had to take decisive action in the interests of the travelling public. That was needed because the privatised system bequeathed by the Conservatives proved in the end to be unable to function efficiently and cost-effectively. As Stephen Byers has said, it was a difficult decision, but one that was needed to deliver a better rail system. I therefore see no reason why Railtrack should have any impact on other proposals for the modernisation of our infrastructure. I believe that financial backers are sophisticated enough to see the singularity of the situation that we faced on the railways.

§ Lord Clarke of Hampstead
My Lords, does my noble friend consider that there is a role for private and public initiatives to help in the regeneration of deprived areas of our country? I am currently investigating the disturbances earlier in the year in Burnley. In particular, perhaps my noble friend could say whether or not he feels that the PPIs could help in the clearance of some of the dreadful housing that I have witnessed over the last couple of months, houses that we should all be ashamed of. Help is desperately needed to clear these dreadful hovels.

§ Lord Macdonald of Tradeston
My Lords, I know that the local government sector has been particularly active with regard to clearing PFIs and PPPs. Since 1997, the capital value of PPPs has leapt to £16.5 billion. There are now almost 400 PPP projects of different types in various stages of procurement. That will take us up to a total of over £30 billion, which will be a key contribution to the regeneration of the country, and particularly the kind of areas that my noble friend indicates.

§ Lord Newby
My Lords, can the Minister say whether he is confident that the part-privatisation of the London Underground will go ahead in the light of the Railtrack fiasco, or whether the Government will now accept the case for keeping the Tube in the public sector?

§ Lord Macdonald of Tradeston
My Lords, let me stress that the ownership of the Tube stays in the public sector. It will continue to be responsible for running the railway. The operation of the track, the signals, trains and stations will remain in public hands. Let me repeat that I see no reason why the Railtrack situation should have any impact on our proposals for the modernisation of London Underground. Financial backers are sophisticated enough to see that the kind of comparisons that the Opposition try to draw are misplaced.

§ Lord Crickhowell
My Lords, is it not a matter of grave concern that the Government can see "no reason"—to use the Minister's words—why the decision about Railtrack should make it more difficult to raise private finance when the overwhelming view of the financial markets is that it will make a considerable difference?

§ Lord Macdonald of Tradeston
My Lords, we believed that Railtrack was a company that was facing financial meltdown. In April, I was party to a decision which advanced £1.5 billion to that company. But in July, after the election, I was interested to read that the company itself felt that the £1.5 billion was not enough to keep it going as a going concern. In the Government's view they were being asked for a blank cheque for no definite return. Any advisers in the financial sector in the City would see that to sign such a blank cheque would be bad business.

§ Lord Barnett
My Lords, will my noble friend ensure that the Government publish a paper indicating how calculations are made as to value for money in the case of a PPP as compared with financing the projects through the Treasury?

§ Lord Macdonald of Tradeston
My Lords, a great deal of work has been done in this area. There is more in progress. I recall from memory of my time there, that there is a promise that the work being done on the public sector comparator for the London Tube will be published in time. If I am wrong about that I shall of course write and let my noble friend know.

§ Baroness Noakes
My Lords, will the Minister accept that whatever the Government's rationalisation of the Railtrack series of events last month, the whole of the financial market was deeply shocked by what they did. For example, Digby Jones, the director-general of the CBI, has said that the Government will have to work hard to restore the faith of the capital markets. My question to the noble Lord is: do the Government intend to do anything to restore the faith of the capital markets?

§ Lord Macdonald of Tradeston
My Lords, we served the capital market well in April by stating plainly that we would stand behind the rail network but that we would not stand behind particular companies or their shareholders. That was acknowledged by Steve Marshall of Railtrack in an interview to the Financial Times of 11th April. He said: Yes, they [the Government] would allow us to go bust. It's quite clearly item one on the agreement with the Government. While the Government stands behind the industry, they don't stand behind any particular company, of course they don't".

§ Lord Tomlinson
My Lords, will my noble friend not agree with me that in the contribution that the private sector has made to finance the railways, the greatest sufferers have not been the people that the Opposition are bleating about but the hard-pressed commuters of 366 this country, the hard-pressed travellers who had what was previously a good railway system destroyed before their very eyes?

§ Lord Macdonald of Tradeston
My Lords, I understand the indignation of the noble Lord and indeed of many members of the travelling public. When I was at the Ministry of Transport we tried to be as understanding and supportive to Railtrack as was possible in the circumstances. The circumstances of July, however, made a continuance of that policy impossible.

§ Lord Saatchi
My Lords, can the Minister shed any light on the mystery of why the public services appear to most people to be in a worse state now than they were when the Government changed power? Is it because, in the words of one Downing Street official: We are running a Soviet-style centralised system and that's never going to work"?

§ Lord Macdonald of Tradeston
Not at all, my Lords. What we are attempting to do is to sort out 18 years of dereliction and under-funding that we inherited. We are doing that very effectively in the sense that public sector investment—net of depreciation—will increase from £6.3 billion last year to £18.7 billion in the year 2003–04.

§ Lord Dubs
My Lords, does my noble friend agree that the long-suffering travellers on London Underground want the service to be improved and do not care where the money comes from as long as it is carried out quickly?

§ Lord Macdonald of Tradeston
My Lords, I agree with my noble friend. I remind noble Lords that one of the guiding principles of this undogmatic Government is to do what works.

§ Lord Jopling
My Lords, does the Minister agree that the public services have a major duty to ensure the safety of British airports? Is he further aware that very recently an aircraft has crashed close to JFK Airport in New York and a number of buildings in the area of Queens are on fire? If that is the result of a ground-to-air missile—nobody knows at this stage—will the noble Lord ensure that British airports are monitored very carefully by the military to ensure that an attack of that kind cannot happen here?

§ Lord Macdonald of Tradeston
My Lords, I am sure that I speak for everyone in the House when I say that the news that has just arrived is received with great sadness. I am no longer at the Ministry of Transport, but I can assure the noble Lord that the reputation of British aviation for its security measures was very high indeed, and I am sure that that will be sustained.