George Eustice
Main Page: George Eustice (Conservative - Camborne and Redruth)Department Debates - View all George Eustice's debates with the HM Treasury
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George Eustice Excerpts(13 years, 5 months ago)
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Andrea Leadsom
I think that my hon. Friends are reading my speech, because that was to be my next point. They have obviously been given advance notice. That is exactly the point: the builder, in theory, takes the risk on a project such as building a school, and the LEA only ever starts to repay the debt when the school is built and everything is in place. Theoretically, the builder takes the project risk. However, as my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) says, in reality there is bundling, and because there are sometimes unique risks to a project, often those revert to the LEA. The perceived advantages from the fact that the builder takes the project risk are therefore not always as clear cut as they might appear. In the end the major advantage has been that of not consolidating the debt on the national balance sheet.
George Eustice (Camborne and Redruth) (Con)
On that point, is my hon. Friend aware that, as well as being poor value for money for the taxpayer, PFI contracts have caused problems with the restructuring of certain elements of the public sector? For instance, several schools that have become academies have had all sorts of problems with their PFI contracts, causing tensions between them and the local authority. Sometimes those problems have been a block to a school’s moving to academy status.
Andrea Leadsom
Again, my hon. Friend takes me to my next point: the other side of the equation is the very apparent disadvantages of PFI, the primary and key one being the lack of flexibility. The reason for it is that often a special purpose vehicle sets up the project, and therefore the project is inexorably linked to its financing. For example, you may build a school and decide you want an extra classroom or two. A PFI school in the constituency of a member of the Treasury Committee built its hockey pitch 2 feet too short for internationals, so it tried to extend it by 2 feet, but therein lay a can of worms. It was impossible to do it other than at exorbitant cost, because the contract and its financing are inextricably tied together within the special purpose company. What happens, and the reason hon. Members have spoken of money being made out of the contract as it proceeds, is precisely that if you want to change the spec—which of course you do—