Oral Answers to Questions

Debate between Jesse Norman and Mark Garnier

Tuesday 2nd July 2019 Commons Chamber

[Jesse Norman]

The hon. Lady will understand that a range of schemes is available for some parts of the charitable sector. We recognise the concern that the hon. Lady is expressing; I cannot deal with individual cases, but obviously if she wants to write to me on the wider issue I will be happy to take it up with HMRC.

[Mark Garnier (Wyre Forest) (Con)]

A much loved local provider of employment for my constituents with learning disabilities has been forced to consider closure after a change in interpretation of the VAT rules regarding the provision of services under the personal payments arrangements; the retrospective VAT bill of around £150,000 means that Spokes, the trading arm of the charity the Emily Jordan Foundation, faces closure with the subsequent loss of a very important local resource. Will my hon. Friend consider meeting with Chris Jordan on behalf of the charity in order to discuss a way forward that can save this incredibly important local business?

[Jesse Norman]

Again, I absolutely recognise the concern, although of course I am not familiar with the details. I cannot get involved in a specific case, but my hon. Friend is welcome to write to me and I will refer the matter to HMRC.

Oral Answers to Questions

Debate between Jesse Norman and Mark Garnier

Thursday 10th January 2019 Commons Chamber

[Jesse Norman]

I have not seen the report that the hon. Gentleman describes, but he will know that in July we published a written ministerial statement touching on the question of whether there might be delays. It is striking that the Secretary of State was not notified until the end of August, and there has been some suggestion that TfL was notified before that.

[Mark Garnier (Wyre Forest) (Con)]

13. What assessment he has made of the effect of the revised EU motor insurance directive on innovation in the UK motorsport industry.

[The Minister of State, Department for Transport (Jesse Norman)]

The issue of Vnuk and insurance is very important and my hon. Friend is absolutely right to raise it. Our assessment is perfectly clear: if it is not amended, the proposal has the potential to shut down UK and European motorsport industries. We take it very seriously. Of course, there would be further impacts on innovation throughout the UK automotive industry, and potentially more widely.

[Mark Garnier]

I am grateful for the Minister’s response. From my conversations with the Motorsport Industry Association, I know that it cannot sing the praises of the Department and officials more highly in respect of this incredibly important point. If the motor insurance directive comes into force, not only will it completely destroy the market for the most innovative part of our automotive sector, but during the transition period it may also destroy the UK domestic market. I know that the Minister is doing everything he can to try to sort this situation out, but I ask him to redouble his efforts and work as hard as he can to make sure that we do not lose the crown jewels of our motor industry.

[Jesse Norman]

I thank my hon. Friend very much for the recognition of the work that my officials and I have been doing on this issue, which we take extremely seriously. Lotus, Williams, McLaren—this country has a £10 billion motorsport industry. These ill-judged arrangements might put it at risk, and we are determined to do everything we can to prevent that.

Private Finance Initiative

Debate between Jesse Norman and Mark Garnier

Thursday 23rd June 2011 Westminster Hall

[Mark Garnier]

Those are the equity sale profits. So those companies are PFI providers who have then sold their contracts, and those figures are the profits they have made. Just to be fair, the figure was 56.3% for Kier Group. Those are pretty sizeable returns.

[Jesse Norman]

It is very important to distinguish two things. One is the internal rate of return, or IRR, of an investment, which is the annual amount by which it gets upgraded; the second is the value that a provider gets when it sells a share. We do not know the answer to this question, but those values are perhaps what they are in part because of the period of time that they have been held. If someone held a share in the London stock market for 10 years, they would see a certain uplift in its value. I do not know what the number is, but it might be 20%, 30% or 40%. It is that kind of thing. The contrast is with the returns that were being made, for example, with the Norfolk and Norwich university hospital, where the refinancing, which loaded up the hospital with £100 million of additional debt, realised an IRR—an annual upgrade in the return to the investors—of 60%. So what my hon. Friend is talking about might be, in fact, a 7% or 8% return each year. We just do not know, and that in itself is a great embarrassment for the previous Government, because we do not have the numbers.

[Mark Garnier]

My hon. Friend makes an incredibly important point. I suspect that what these numbers are telling us is that the annual returns are being treated rather like the dividends on an equity investment in the stock market and these capital returns—the sales of equities—are the capital return that the company gets. So they are already getting their annual rate of return and this money is in addition to what they would expect to receive if they ran the contract to the end. But we need to clarify that, because these are incredibly important points.

The Government are committed to the PFI and, as we have already heard, they have 61 new projects being procured as of earlier this year, with a value of £7 billion. That is not necessarily a bad thing because money is being invested into the supply side of the economy, and we need that investment to support our expectations of economic growth and to sort out the financial mess that the coalition Government have inherited. The PFI allows that investment to happen without any immediate impact on measures of public sector capital expenditure or borrowing. However, the efficiency case for the PFI rests on the model’s ability to allocate risk more effectively than regular procurement. To date, there seems to be no empirical evidence to support any claims that the higher price of PFI finance has offset any reduction in costs.

The efficiency case looks even more fallacious in the light of falling interest rates, as we heard earlier in the debate. The Government can borrow directly at around 3.3% and yet the IRR on a PFI contract is now 4% higher than that. That is a significant risk premium to be paid by the Government, especially when the PFI investor frequently offloads risks on to subcontractors. We have heard that before. Given that we have very low interest rates and can issue gilts on a 25-year basis, should that not be one way to look at financing some of the supply side of the economy?

Coming away from the financial side, I am not sure that some of the users of PFI facilities are always that happy. Wyre Forest was one of the areas that suffered under the cancellation of the Building Schools for the Future programme. I am continuing to work hard to get rebuilding finance for up to 11 of my local schools. We are waiting for the James review on that.

Wyre Forest secondary schools were to be built under PFI contracts. In private chats that I had with various head teachers and governors, they were concerned that a PFI contract would tie their hands financially, limiting their ability to determine their budgets and, therefore, investment in teaching and teachers. We all want new schools, but at what cost to education? PFI has a place in the future in terms of funding investment, but it has to be done at the right price. A lot more work needs to be done on ensuring that we get the end product at the right price. That is why I am incredibly grateful to my hon. Friend the Member for Hereford and South Herefordshire, for taking the initiative to question this important area so closely, and to work so hard for the future of PFI.