Foreign and Commonwealth Office

Jesse Norman Excerpts

Tuesday 24th May 2011 Commons Chamber

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I would like to update the House about the progress on a subject that has become something of a preoccupation of mine of late: the private finance initiative. Members will be familiar with the details of the PFI, including its cost, complexity and lack of transparency and the level of advisory fees involved. The issue affects almost every constituency in the land and therefore almost every Member of the House.

As hon. Members will be aware, there have been far too many scandals for comfort over the years. Let me refresh our collective memory with a few choice examples. The Ministry of Defence pays £22 for each of its 100 W light bulbs. The Public Accounts Committee recently found that the project to widen the M25 took nine years simply to procure, that the cost was likely to be in the region of £1 billion too much and that the advisory fees alone were in the order of £80 million. It is an interesting fact that under the Building Schools for the Future programme, secondary schools were required to have atriums, as though they were multinational corporations, at colossal cost. One might ask why that should be so, but so it was.

Members can take their pick as to their preferred PFI scandal, so it is little wonder that the campaign to secure savings on the PFI now has 70 Members from across all major parties in the House. The campaign is not about tearing up contracts, but about renegotiating them, locating savings without a loss of services and sharing future rewards more equally with the taxpayer. Since the campaign was launched last year, we have made huge progress. The Department of Health is looking very hard, through what it has referred to as its “deep dive”, at its costs at Romford hospital, from which it hopes to infer a programme of cost savings that can run across the entire PFI hospital network. The MOD has reopened contracts at Corsham and two other facilities. The Public Accounts Committee is holding a hearing next month with key players in the industry to find out what has gone wrong, and I am pleased to say that the Treasury Committee—my own Committee—has held an inquiry and is holding a hearing on that inquiry’s findings, focusing on alternatives to the PFI.

In recent months I have had extensive meetings with industry, with Ministers and officials at the Treasury and Cabinet Office, and with the National Audit Office. I thank my hon. Friend the Member for Daventry (Chris Heaton-Harris) for his intervention in that regard. I have had meetings extensively with the different players in the industry—the contractors, the developers, the banks, the service providers and the advisers—and I have been surprised by the positive response from those organisations. There is clearly a high level of interest in working with the Government to remedy some of the evils of PFI over recent years and setting the stage for the much improved use of private finance in the future.

However, it is important for colleagues to note that some firms remain outside the process. I will mention some in particular. Innisfree, which has been a very big PFI provider, has decided to bury its head in the sand. That organisation has been associated with some of the most lucrative deals for the private sector. It had a profit last year of 53% of its turnover. Sodexho is a very large national service provider, whose exorbitant costs I drew to the attention of the House last year, in relation to Hereford hospital in my constituency.

I draw the attention of the House to the performance of the advisers as a group—the law and accountancy firms, which have not participated so far in the process. It is striking that no matter how many transactions are done, the advisory fees on PFI deals have not fallen at all over the past 15 years.

I shall be approaching the Backbench Business Committee on 7 June for a full debate on the subject of PFI. I very much hope that as many Members as possible will join the campaign if they have not already done so, support my approach to the Committee, and speak in that debate.