HL Deb 03 February 2003 vol 644 cc9-10

3 p.m.

Baroness Sharp of Guildford asked Her Majesty's Government:

What changes they have made in private finance initiative procedures as a result of the shortcomings revealed by the Audit Commission report on experience with private finance initiatives.

The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland)

My Lords, the Audit Commission's report found that, while teaching staff and pupils were generally pleased with their new schools, there had been some difficulties with procurement and design. However, the report focused only on a small number of very early PFI pathfinder schools. Since then, as the report itself makes clear, the department has refined and improved the schools PFI process and will continue to do so.

Baroness Sharp of Guildford

My Lords, I thank the Minister for her reply. She is, however, not explicit as to what the ministry has done as a result of the Audit Commission's report. She will be aware that there are over £2.5 billion-worth of PFI contracts outstanding in the schools sector, and that it is in effect the only game in town for LEAs that wish to renew and upgrade school buildings. Is that wise? Is not one of the lessons of the Audit Commission's report that public benefits from competition in tendering procedures are considerable, and that the inclusion of a straightforward public sector option in compulsory competitive tendering techniques might yield better value for money?

Baroness Ashton of Upholland

My Lords, in looking at the Audit Commission's recommendations, the noble Baroness might see that we have taken on board or are already working on the vast majority. Where we do not agree with the Audit Commission is in its view that there should be a straight option between public sector finance or the private finance initiative.

The current capital for schools this year is £3 billion. Of that, 72 per cent. or £2.15 billion, is in conventional capital, and only £850 million, or 28 per cent. is in PFI credits. Thus far, 500 schools are covered by the PFI and 400 more are in the pipeline. We believe that this is a good deal for local education authorities.

Baroness Blatch

My Lords, what would be the quantum of the department's obligation to the PFI if the figure were to appear on balance sheet as opposed to off balance sheet?

Baroness Ashton of Upholland

My Lords, I am happy to confirm the figures that I have in front of me: of the £3 billion-worth of capital that we have, 72 per cent is in conventional capital. £850 million, or 28 per cent. is in PFI credits for this year. I am, of course, happy to give a running total to the noble Baroness and to place a copy in the Library. A total of £1.3 billion in private sector investment is going into our schools—often in very creative and innovative ways. It is a huge asset to the education service.

Lord Clement-Jones

My Lords, does not the Audit Commission's report simply confirm what many of us have known for a long time; namely, that in many key areas PFI represents poor value for money? Is it not high time that the Government accepted that and therefore ceased to skew the whole of the financing of both health and education away from public sector finance and towards the PFI?

Baroness Ashton of Upholland

My Lords, I do not agree. The noble Lord may be aware that all projects are required to have a public sector comparator before entering procurement. That comparator is continually refined to reflect current needs. We look at the lifetime of the PFI contract because part of the purpose of the contract is to enable us to have at the end of it stock for our country that is able to be used and is of good quality. In addition, it enables teachers to concentrate on teaching—and in the health field, in which the noble Lord has a particular interest, it enables doctors, nurses and managers to concentrate on running the NHS—without worrying about buildings and maintenance.