Private Finance Initiative

Debate between Anne Marie Morris and David Mowat

Thursday 23rd June 2011 Westminster Hall

[Anne Marie Morris]

I agree. My argument is that that is part of the problem, rather than the totality of the problem. My second request is that we find a way of delivering transparency and better management of the contracts. One hospital was charged £333 to change a light bulb. I dare say that that changes the hospital’s decision about whether it will change many light bulbs. One school was charged £300 just to install an electrical socket. How many times will the school install a socket on that basis? One Army official was charged £103 for a 1-inch Land Rover screw that actually cost just over £2. That is not the right way of doing things.

[David Mowat]

The three examples that my hon. Friend has cited are powerful, but they represent procurement failures by the public sector procurement people involved and structural failures in the nature of the contract, because the contract did not have to specify, for example, exactly how light bulbs would be maintained. We have examples of multiple procurement failures. PFI is being used as a proxy for that. Those procurement failures can happen with any technique or contract.

[Anne Marie Morris]

My hon. Friend makes a valid point, which is why the issue is far more complicated than a rebate.

The risk is overestimated. Projects are not monitored, partly because there is no transparency. As has been said, the size of the debt has been hidden because it is off balance sheet. If we looked at the real national debt figure, then rather than £910 billion, we would probably be looking at £1.12 trillion.

I can perhaps best illustrate the distortion in the way in which public services are used by explaining what is happening in my constituency. There is a wonderful new build hospital in Newton Abbot. It was the winner of the 2007 HealthInvestor PFI deal of the year award. But what has happened? In that hospital, we are finding considerable underuse of facilities. Beds and consulting rooms are not being used as they might be. Why? The reason, as I understand it from individuals who have come to me to raise this concern, is that it is just too expensive to use those facilities rather than the cheaper facilities in neighbouring hospitals. I am pleased to say that the primary care trust has taken the matter up and is considering how better use of the facilities at Newton Abbot hospital can be made. However, it is an example of how behaviour can be changed.

The challenge, therefore, is not only to get the cost down. Reference has been made to what the Government are already doing. I am pleased that we have a PFI hit squad, which has already taken £4 billion out of the project list. I am minded to look very favourably on the concept of a rebate, but as I said, a rebate will not be enough. There are two aspects to trying to sort out the financial mess. One is the issue of maintenance. Clearly, there are ways of reducing maintenance costs under the contracts, and whatever saving comes out of any renegotiation needs to be shared with the taxpayer and the local community. The second aspect is the payback rates. We have heard many examples of the payback rates in this context being well above the payback rates for similar risks in the market. Those two issues need to be considered.

To return to where I started, one issue that we need to consider is the impact on what happens in other parts of Government. We need to consider our health care reforms, because many of the PFI contracts are currently held by the primary care trusts. Those PCTs will cease to exist in the not-too-distant future. As and when we see their demise, what will happen to those contracts? Is that an opportunity or a threat? That is a serious issue, which my right hon. Friend the Secretary of State for Health will need to consider in conjunction with the Treasury. We have heard about the examples of schools and the challenges for some of negotiating academy status because of existing PFI contracts. To conclude, this is a complex issue. It is not something that the Treasury can deal with alone. Some joined-up thinking needs to be applied to it across a number of Departments.