Private Finance Initiative (Hansard, 6 November 2002)

§ Lord McCarthy
asked Her Majesty's Government:
What proportion of private finance initiative deals completed since 1997 have been:

(i)examined by the National Audit Office;

(ii)found to provide equal or better value for money than their appropriate public sector comparator.

§ Lord McIntosh of Haringey
My Lords, from April 1997 until July 2002, some 412 private finance initiative (PFI) contracts have been signed. These are listed on the Office of Government Commerce website. These statistics are updated periodically. The next update will follow publication of the official PFI statistics which are reported to Parliament twice each year.
I understand that the National Audit Office has issued some 24 reports on the PFI and these are listed on the NAO website and can be found in the Library of the House. Government policy is that all PFI deals are assessed against the public sector comparator where one is required as part of the assessment of their value for money. Projects will proceed only if individual accounting officers are content that they provide equal or better value for money than the alternative methods of procurement.

§ Lord McCarthy
My Lords, I am bound to press that Answer a little. The Minister said that 412 private finance initiative contracts have been signed and that 24 were checked up on. That is less than 5 per cent. What about all the others? How are we to know when they are examined—if they are examined—whether they will constitute better value than the traditional way of financing these projects? How will the others be examined? The Minister said that these projects proceed only when they pass the better value test. However, the reports of the National Audit Office do not say that. Will the Government produce rather more sophisticated long-term evaluations of the PFI?

§ Lord McIntosh of Haringey
My Lords, I said that there were 24 National Audit Office reports. Some of those reports cover much more than one private finance initiative. One of them, for example, is a survey of 120 of them. A figure of rather more than 5 per cent is involved.
710 The NAO does not report to the Government. Its value for money studies certainly include the public sector comparator as a test. However, it says, non-financial factors, such as the contractual incentives…to deliver on time and budget", are also of importance. I am afraid that the situation is not as simple as my noble friend Lord McCarthy would like to think.

§ Lord Saatchi
My Lords, the Government said that their treatment of those items in the national accounts conforms with all accounting rules. Is the Minister aware that the executives at Enron said much the same? They had cleverly used the rules to hide the true extent of their liabilities. Are not the Government doing exactly the same to understate their liabilities by £100 billion?

§ Lord McIntosh of Haringey
My Lords, the Government had no incentive whatever to try to take items off any balance sheet, and we do not. The criterion for PFI projects is value for money. I wonder whether the noble Lord, Lord Saatchi, is aware of the joint statement of 24th October from the NAO and the Office for National Statistics. They said that these, are not … alternative ways of looking at the same issue", but, fundamentally different activities undertaken for distinct purposes and using different criteria". That is why there is no question of any concealment.

§ Lord Newby
My Lords, does the Minister accept that, in terms of value for money, major concern is now being expressed about the PPP for London Underground? Some £400 million has been spent on consultants. Will the Minister take this opportunity to dissociate himself from the London Underground official who was quoted earlier this week as saying that this extraordinary sum is a mere drop in the ocean?

§ Lord McIntosh of Haringey
My Lords, we do not recognise the £400 million figure that has, I agree, been widely quoted. We suspect that any such calculation is likely to include the cost of London Underground staff and advisers who would have to be employed irrespective of which programme for the regeneration of London Underground is undertaken.

§ Lord King of Bridgwater
My Lords, the Minister said that the criterion was value for money. Is not the implication of that statement that in all of these cases, public money is available as an alternative to funds raised through the private sector? Will he clarify—this point has become increasingly important in view of the straitened situation that will face the Government—how many projects would not have gone ahead unless they had been conducted under a private finance initiative?

§ Lord McIntosh of Haringey
My Lords, there are two responses to that. First, we must make it clear that PFIs are not being undertaken, as they were under the previous government, as an alternative to public 711 investment. Public investment in all of these activities has increased under this Government; it is continuing to increase and is planned to increase. Those are not alternatives. Secondly, I do not know whether it is appropriate to say that public finance is "available", as the noble Lord, Lord King, suggested. However, we are not in any danger of breaching either European rules—because, as is known, our debt has decreased from 44 per cent of GDP to 30 per cent of GDP since we came into office—or our own rules, in relation to which we now take proper account of investment and amortise it over the life of the asset.

§ Lord Brooke of Alverthorpe
My Lords, will my noble friend consider organising a short seminar for the House so that we can understand the difference between PPPs and PFIs, which might in turn help to raise awareness throughout the House?

§ Lord McIntosh of Haringey
My Lords, I am grateful to my noble friend. I have been accused of being incomprehensible—

Noble Lords
Never!

§ Lord McIntosh of Haringey
My Lords, by my noble friend Lord Barnett, no less. It is certainly true that a great deal of questioning on these matters is ill founded.

§ Lord Smith of Clifton
My Lords, if the £400 million figure is disputed by the Minister, will he tell us precisely what the figure should be?

§ Lord McIntosh of Haringey
My Lords, there is no precise figure. This is an ongoing process. You can make up figures as you wish.

Noble Lords
Oh!

§ Lord McIntosh of Haringey
My Lords, I said, "You can"; I did not say, "We can".

§ Baroness Noakes
My Lords, I was pleased to hear that the Government have no interest in concealment. That is news to those on these Benches. I shall not ask the Minister to agree that the next Pre-Budget Report will show rapidly rising levels of public debt, because I know that even if he agreed with me, he would find a clever way of not doing so. I ask him to commit in that Pre-Budget Report to giving a comprehensive statement of the Government's liabilities, including those under PFI, whether or not they have persuaded the ONS to score them off the Government's balance sheet.

§ Lord McIntosh of Haringey
My Lords, I do not know whether the way in which the noble Baroness, Lady Noakes, framed her question was a clever way of 712 avoiding quite accusing me of concealment. I suspect that it was. I shall not anticipate the Pre-Budget Report in any way.

§ Lord Stoddart of Swindon
My Lords, if the Minister sets up—

§ The Lord Privy Seal (Lord Williams of Mostyn):
My Lords, we are already in the 16th minute.