Private Finance Initiative

Marcus Jones Excerpts

Thursday 23rd June 2011 Westminster Hall

[Mr Marcus Jones (Nuneaton) (Con)]

Thank you, Mrs Main, for allowing me to speak in an extremely important debate. I congratulate my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) and others on the Backbench Business Committee on securing this vital debate. It is a crucial issue that is of great interest to my constituents, and I shall focus on that constituency interest.

Hon. Members have given a very technical analysis of PFI, its failings and what we should possibly do about such arrangements. However, in very practical and tangible terms, I want to speak for my constituents and explain why this rebate for the PFI would be extremely beneficial to them. If I may put that into context, I will be talking about the huge PFI scheme at the University Hospitals Coventry and Warwickshire NHS Trust.

Let me give hon. Members the background. A large tertiary hospital on the edge of Coventry was built under the previous Government’s PFI regime. The hospital replaced the then Walsgrave hospital, where I was born in the early 1970s. The new incarnation of the Walsgrave, as we know it locally, is undoubtedly a great hospital. When I say that, I do not just mean great as in good, although it is an extremely good hospital, but great in terms of size, because it has 1,250 beds and 27 operating theatres. The hospital is a large fish in a small pond in terms of the Coventry and Warwickshire health economy.

Since the hospital started to operate in 2001, the cost of the PFI contract has been substantial, with more than 14% of the University Hospitals Coventry and Warwickshire NHS Trust budget now consumed by the PFI contract and the obligations under it. The main problem with the PFI contract is that the costs are pretty much fixed. Regardless of patient numbers, under the contract the trust must still pay over a long period for the buildings, repairs, cleaning and provision of support services. Should demand fall or patients decide to go to another hospital in the Coventry and Warwickshire health economy, inevitably those fixed costs remain and must be borne by the hospital.

[Mark Pawsey (Rugby) (Con)]

My neighbour and colleague is making a strong case about the impact of the UHCW in the health economy of Warwickshire, but my interest is my local hospital of St Cross in Rugby, which is part of the same trust. One of our big concerns is that, with such a large proportion of the health economy going into the PFI hospital, in times of budget pressure such as now, the bias will always be towards the PFI contract, which must be fulfilled and maintained, but that might be to the detriment of other hospitals locally and, in particular, those in the same trust.

[Mr Jones]

My hon. Friend, whose constituency neighbours mine, has hit the nail on the head.

In our situation, regardless of demand or whether the Coventry and Warwickshire PFI hospital wants to close a ward or to stop the activity associated with closing a ward, such as the cleaning or maintenance, the fixed costs must still be met. That is most detrimental, and it is a drain on the Warwickshire health economy.

Another concern relates to the primary care trust and the strategic health authority. That context is changing, but some of the people involved in those organisations were instrumental in the creation of the PFI hospital and, whatever happens, I suspect that they would not want to see the hospital—this landmark development in Coventry—fail. The concern is because, ever since the hospital was built—before the mortar between the bricks or the paint was dry—the local PCT, NHS Warwickshire, has been trying to reconfigure services. We immediately had an acute services review, which threatened services at my local district general hospital, the George Eliot, and to a greater extent at Rugby’s St Cross, as my hon. Friend the Member for Rugby has said. NHS Warwickshire paired St Cross up with the Coventry and Warwickshire trust which, really, subsumed it. Services were drained away from Rugby to the new PFI hospital in Coventry, regardless of whether people in Rugby wanted the choice of going to St Cross. If we do not get a grip on the situation soon, I fear that the same might happen in my constituency at the George Eliot.

That brings me to the crux of the argument made by my hon. Friend the Member for Hereford and South Herefordshire. I echo his concern about such huge beasts of projects, which are so expensive and we hear stories about, such as the £300 for changing a light bulb. They are real, tangible problems, and our constituents cannot understand why the previous Government signed the taxpayer up to such ridiculous commitments. Although the previous Government took on those contracts, I appreciate that the new Government cannot simply tear them up. Some difficulties might arise from how the contract was framed, in particular on the capital commitments. The companies that originally constructed and financed the hospitals have sold the debt on, and it might have been sold on again, so we would now find it difficult to pin down those people and to get some form of rebate.

[Stella Creasy]

I am interested in what the hon. Gentleman is saying. We have all talked about the difficulty of renegotiating the existing contracts, but 61 PFI projects are currently in train for which contracts have not yet been signed. Is the logic of what he and perhaps other Government Back-Bench MPs are saying that they want the Government to stop the negotiations and to look at another format? I do not understand. If there are so many concerns about PFI as a model—it never seems to work and is always too expensive—is the sum total that it should not happen at all?

[Mr Jones]

I am not necessarily saying that PFI should not happen at all, but that contracts should be negotiated in the correct fashion to minimise the taxpayer’s exposure to situations such as those we have seen. Contracts must be right when ensuring that organisations are a suitable size, for example, to fit into the local health economy. With hindsight, we might question whether the PFI hospital at Coventry was too large for the wider Coventry and Warwickshire health economy.

The general point is that we must get the issue right in future. I accept the hon. Lady’s comments, but I am confident that Ministers are ensuring that any contract negotiations will be made properly, so that we do not over-commit the Government, as was done previously.

[Jesse Norman]

Does my hon. Friend share my view that there is a world of difference between Building Schools for the Future, a form of PFI that the Government could and did cancel, or specific projects which were inherited but which they were uncomfortable with, such as Hartlepool hospital, which they have also stopped, at least for the time being, and the vast preponderance of the 61 projects inherited from the previous Government? The toxic inheritance from the previous Government was an enormous sausage machine, with huge embedded costs, which we have had to deal with despite a difficult economic situation. There is something grossly wrong in comparing £200 billion of spending under the previous Government with the need to get the situation under control. Does he share my view?

[Mr Jones]

I share my hon. Friend’s view, which he has expressed powerfully. We must also consider a point made by my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) that, thanks to the Labour party, the country is now so indebted that, to put in any new infrastructure, we have to look seriously at schemes such as the PFI, because without them the country simply does not have the money to finance any projects.

[Stella Creasy]

Will the hon. Gentleman give way?

[Mr Jones]

I will not give way, because I am mindful that other Members wish to speak.

In conclusion, my hon. Friend the Member for Hereford and South Herefordshire has done an excellent job in bringing the PFI to the fore. I sincerely hope that the Government and the Minister will look at the issue closely and carefully to see whether we can get some form of rebate from the providers of PFI projects—in particular, over the terms of the service contracts—not only because of the financial situation but to ensure that the quality of services such as cleaning and maintenance are preserved, but at a lower cost.

I hope that the Minister shows the same vigour and enthusiasm as my hon. Friend the Member for Hereford and South Herefordshire. If she takes the matter forward, which I am confident that she will, hopefully we will see a great day for the British taxpayer and for people in constituencies such as mine, who are suffering the cost of the frivolity of the previous Government, which is now affecting the Warwickshire health economy.