HC Deb 19 December 1997 vol 303 cc367-8W
Mr. Beith

To ask the Secretary of State for the Home Department what is the public sector comparator against which the Prison Service has calculated whether the prisons to be built and managed under the Private Finance Initiative at Bridgend and Fazakerley will result in cost savings; what assumptions the comparator includes; if he will publish those calculations; and if he will make a statement. [18092]

Ms Quin

The public sector comparator is the estimated discounted cost of alternative procurement and operation of a prison which will be designed, constructed, managed for 25 years and financed under a private finance initiative contract.

The principal assumptions made in calculating the comparators for the prisons at Bridgend (Her Majesty's Prison Parc) and Fazakerley (Her Majesty's Prison Altcourse) were:

  1. (i) design and construction using public finance;
  2. (ii) operation by a private sector contractor;
  3. (iii) delays and cost overruns at a rate consistent with other recent public sector prison building projects;
  4. (iv) wage inflation at historical average annual rates (2 per cent. above movements in the retail price index);
  5. (v) an additional price increase at the end of the fifth year of the operating contract; and
  6. (vi) the annual cost of public finance would be six per cent. in real terms.

The detailed calculations are not available in publishable form, but the estimated contract costs and savings against the public comparators (in Net Present Value terms) were as follows:

Contract value (£m) Savings against public sector comparator, per cent.
Bridgend 319 17.0
Fazakerley 248 0.4
Overall savings for both prisons 10.0

In 1996, the public sector comparator for Fazakerley was re-calculated to take account of improved efficiency within the public sector, with two significant changes to the principal assumptions. These were:

  1. operation by the public sector with costs reducing in line with the Prison Service's target of 5.7 per cent. in 1997–98 and salary increases at 0.5 per cent. above the retail price index after that; and
  2. no delays or cost overruns.

As a result, the contract value for Fazakerley was estimated to be 1 per cent. less than the public sector comparator.

These comparators were examined in the Comptroller and Auditor General's Report on the Private Finance Initiative Contracts for Bridgend and Fazakerley Prisons (HC 253 of session 1997–98).