|Previous Section||Home Page|
Column 822Temple-Morris, Peter
Thompson, Sir Donald (C'er V)
Thompson, Patrick (Norwich N)
Thornton, Sir Malcolm
Townend, John (Bridlington)
Townsend, Cyril D. (Bexl'yh'th)
Twinn, Dr Ian
Vaughan, Sir Gerard
Waldegrave, Rt Hon William
Walker, Bill (N Tayside)
Wardle, Charles (Bexhill)
Wheeler, Rt Hon Sir John
Wiggin, Sir Jerry
Winterton, Mrs Ann (Congleton)
Winterton, Nicholas (Macc'f'ld)
Young, Rt Hon Sir George
Tellers for the Noes :
Mr. Irvine Patnick and
Mr. Michael Brown.
Question accordingly negatived .
The following subsection shall be inserted after section 6(1) of the Income and Corporation Taxes Act 1988
(a) a company has been formed for the purpose of the construction, design and operation of roads, rail or other transportation projects, the provision of training or child care, or such other purposes as the Treasury may by regulation deem appropriate, and
(b) not less than 10 per cent. of the issued share capital of that company is owned by the Government or other public sector body at the end of an accounting period, and
(c) not less than 30 per cent. of the issued share capital of that company is owned by private bodies at the end of the same accounting period,
then the liability of that company to corporate tax under this section for each accounting period shall be reduced by £100.".'.-- [Mr. Darling.]
Brought up, and read the First time.
Mr. Alistair Darling (Edinburgh, Central) : I beg to move, That the clause be read a Second time.
Madam Deputy Speaker : With this it will be convenient to take new clause 18-- Joint Ventures for Infrastructure Investment between Public and Private Sectors (No.2)
The following section shall be inserted after section 6(1) of the Income and Corporation Taxes Act 1988
(a) a company has been formed for the purpose of the design, construction and operation of roads, rail or other transportation projects, the provision of training or child care, or such other purposes as the Treasury may by regulation deem appropriate, and (b) at the end of the period of concesssion the assets and activities of the company are to pass to the public sector, then the liability of that company to corporation tax under this section for each accounting period shall be reduced by £100.".'.
Mr. Darling : The new clauses are technical in nature but they allow us to debate an important matter that is crucial to the future of the United Kingdom and the world economy. Both concern the need for more initiatives involving public and private sector capital.
Column 823The need to invest in Britain's infrastructure is obvious to most people, if not to the Government. At the last election, the Labour party was anxious to ensure that the public sector had private sector money available to it. My hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), the shadow employment spokesman, spent much of the general election campaign emphasising the fact that we believed that it was necessary for British Rail to attract private sector money. At that time, he was roundly criticised by the Government, who suggested that such a solution to the problem was not acceptable and should be rejected. Yet immediately following the general election the Government adopted exactly the same policy, showing that yet again they followed Labour party policy in this area of industrial development.
The bankrupt nature of the Government's approach during the past 15 years is best illustrated by what has happened with the channel tunnel link between London and the Kent coast. This summer, trains will travel through France at 185 mph. They will then travel through the tunnel at 85 mph. Then, and for the next 10 years, they will limp through Kent--a 75-mile bottleneck--at just 47 mph. The decision to build the channel tunnel was taken in 1986 and work began in December 1987. Yet Britain will probably not have a fast link between London and the Kent coast until 2004. Until we have that fast link there will not be the through link to many parts of England and to Scotland, all of which should benefit from the opening of the channel tunnel. I believe that that has happened because of the Government dogma which prevailed throughout the 1980s, and which we still see today, which says that only private sector money is appropriate for large infrastructure projects of this kind.
We know that parts of the London underground system are more than 120 years old. Anyone who travels on any part of the London underground system-- which, as a general rule, Ministers do not--will know that it is in desperate need of overhaul. Even when the Government recognise that action is necessary, there is delay. The Northern line is an example of that, to which I shall return shortly.
The Heathrow express line, now a public-private sector partnership initiative, was planned 10 years ago. We have one of the world's major airports, if not the world's major airport ; yet there is no efficient public transport link between it and London city centre. The Piccadilly line, which currently links the two, is an appalling service. I can bear personal testament to that, and it is no way to link a modern airport with a city centre. Yet after years of delay and argument the Heathrow express line will not be ready until 1997--and even when it is completed it will dump passengers at Paddington station with no direct link anywhere else.
The crossrail project, which will link east and west London, has still to complete its parliamentary passage and we do not know when, if ever, the line will be completed.
Leaving aside the argument whether the London docklands development was a good scheme, we had the absurd situation where it was completed but there was no infrastructure to enable people to get in or out of it. Until recently, the London river bus--another casualty of the recession--was by far the best way to docklands and other parts of London because the road and rail links were not efficient. We also know that one in six sewerage pipes in Britain is more than 100 years old.
Column 824Alongside all those projects which desperately need investment we have between 3 million and 4 million people who are unemployed and condemned to a second class existence. They are people who want to work. There is work to be done and there are people ready to do it. What we need to find--and what the Government should find-- is a solution which brings the work that is needed to those who want to work. The kind of initiative highlighted by new clauses 13 and 18 would provide one possible solution. I emphasise that it is one solution because there are other possibilities.
Clearly, projects totally financed by the public purse and those totally financed by the private purse are ways of tackling these problems, but I wish to concentrate on the solution that would be enabled by the new clauses--matching the need to invest with the available private sector finance if such finance is available. That is one reason why we published a consultative document entitled "Financing Infrastructure Investment" in February this year. We subsequently held a conference which was heavily over-subscribed and attended by industrialists and financiers, confirming our belief that the private sector wants to contribute and that the biggest single barrier to progress is Government dogma, on the one hand, and simple paralysis on the part of the Government on the other.
I do not believe that there should be any ideological difficulty over the funding of such projects. For far too long, political ideology has been dominated, certainly on the Government side, by the issue of public financing. Throughout the 1980s, the Government held that the only spending worth undertaking was that undertaken by the private sector. If the private sector could not or would not do it, it was not worth doing. That is as daft as saying that the only way to finance public works is through the public sector.
Partnerships between the public and private sectors are essential. They are used in many different parts of the world. Local authorities throughout Britain have been pioneering such developments. The Government should now embrace the concept in order to tackle the woeful lack of investment in public infrastructure. The negative, polarised attitude has to change. We need to bring about the structural changes which are needed if partnerships are to develop. Public money should be used in a way which maximises the benefit to the community, which includes public infrastructure. If public funds are applied and they in turn attract public funding, aggregate spending is increased, bringing both direct and indirect benefits. Our concept of public-private partnership is ambitious and expensive-- [Interruption.] That was a mere slip of the tongue. Those who have been observing the debate so far will have noticed that our amendments are far from expensive, as the Financial Secretary has already seen. Our partnerships are ambitious and expansive. We see the scope for new partnerships not just in the provision of rail and infrastructure, but in inner-city and regional developments, training, housing and child care, as we discussed at some length in the previous debate.
As a first step, the Government should draw up a list of their priority projects. That is what seems to me to separate the Labour and Conservative parties. The Conservative party has never yet drawn up a list of those projects that it considers to be major priorities. It is for the Government to
Column 825determine their infrastructure priorities and then to invite the private sector to participate--not the other way round. That simply has not happened. No doubt the Financial Secretary will tell us why. That is also the view of the private sector. It is not just the Labour party which is saying that the public sector should do this. The Royal Bank of Scotland has said :
"The public sector takes an active role in identifying and promoting priority projects."
John Laing--no particular friend of the Labour party--has said that it is essential for the Government to ensure that projects are drawn up so that
"the private sector pursues projects at the top of the Government's shopping list."
That has not happened so far and it should happen as a matter of urgency. Instead, in the past 15 years we have had a Government ideology which has maintained that only the private sector knows best. That view has been rejected by the private sector itself. Yet every Conservative Member in the House today has been a bag carrier of that failed Tory dogma in the past.
Last September, the Chancellor decided that a new initiative was required. Having announced that because he was born in the midlands he had an eye to industrial strategy, he produced a list of 78 projects that he claimed demonstrated the Government's commitment to public-private sector projects. They ranged from the channel tunnel link at one extreme to the car park behind Eastbourne hospital at the other. When he addressed the Confederation of British Industry last November, he said in his typical style :
"You could say it is about privatising the process of capital investment in our key public services."
As usual, he missed the point. The Government must determine priorities.
With other projects, the risks are too great to be borne by the private sector alone. Where such projects are to be encouraged, it must be the Government's responsibility to take a lead and to share the risk appropriately. Many projects, such as the west coast railway, have a strategic importance but are not necessarily seen by the private sector as an attractive commercial proposition, or at least not in their entirety. In that instance, no private firm would contemplate the line's wholesale upgrading ; but in partnership with the public sector, certain parts of the project might be attractive to a private firm and it might be willing to help fund them.
Mr. Beith : I agree with the hon. Gentleman, but surely his earlier slip of the tongue was right. Some projects are expensive, but they are justified and cost-effective. The crunch is whether the Government are prepared either to put up the money or to underwrite the risk of some of the projects that he described. We shall not get away with £100 concessions to companies, as the hon. Gentleman's amendment proposes. It will require some commitment of public money to achieve the hon. Gentleman's objectives.
Mr. Darling : The right hon. Gentleman makes a fair point. Of course the sums at stake are substantial, particularly in respect of the channel tunnel link and the upgrading of the west coast main line. Ultimately, the public will fund those projects with the public purse through taxation, to service the loan. If they are funded jointly by the private and public sectors, the money will come partly from taxation and partly from fees, pricing or some other means of paying for them.
Column 826Earlier, before I was diverted by the Financial Secretary, I made the point that if public money is applied in that way and brings in private money, the aggregate investment is increased. I wholeheartedly accept the right hon. Gentleman's proposition that if the British economy is ever to get out of the rut that it is in, infrastructure investment in key projects will be needed. The Singapore Government, for example, are building both a physical highway and a telecommunications superhighway through the spine of that country. That is one example of a country prepared to embark on a major investment led by the public sector but subject to a substantial private sector commitment. That will bring economic spin-off developments which will provide employment for people who will then contribute taxes and national insurance or whatever is the appropriate system in that country.
I fully accept that such developments do not short-circuit the fact that if the public sector is involved it creates a public sector borrowing requirement commitment. We are debating ways of introducing private and public sector money to allow investment in infrastructure projects which have been neglected for many years.
Precisely that argument led me to emphasise the need for a channel tunnel link. It is not a narrow matter of a link between London and the Kent coast. The entire railway infrastructure to allow British companies to export to the rest of the European Union depends on a link between all parts of Britain, the tunnel and mainland Europe. That will not be possible in the absence of a fast link between London and the Kent coast, which is unlikely to exist for another 10 years
The west coast main line was one of the most modern railways when the Government came to power in 1979, but it is now desperately in need of investment and its managers warn that it is at risk of catastrophic failure. All that the Government have done is to put obstacles in the way. Instead of the private sector or the Government dealing with one operator-- British Rail--the network is run by more than 20 operators, all with their own goals and priorities. We know the difficulties that that has caused. Strathclyde passenger transport executive, which operates a major commuter network in the west of Scotland which is vital to communications there, is finding it difficult to maintain its commitment with ScotRail, which operates the Scottish rail network, because of uncertainty about the effects of privatisation. It is tragic when an integrated transport system is put at peril because of Government dogma.
Earlier I mentioned the Northern line of the London underground--a classic case of the inflexibility of Government rules. Their policy has repeatedly delayed the investment that anyone who uses that line knows is desperately needed. The manufacturers of the new trains are happy to enter into an agreement to lease and to maintain them, which is important, because problems will inevitably arise with new rolling stock and they will have to be overcome. The Government want the manufacturers to go one step further and share the revenue risk. The people who build the trains freely admit that they do not have operational expertise. They cannot control the revenue, as they have no control over fare structure or marketing.
I do not argue that leasing and maintenance is the solution that we would go for in every case--there may be occasions when revenue risk is entirely appropriate--but the Government must devise some mechanism which
Column 827offers the flexibility required. If the Government want a project badly enough, they should accept a greater degree of risk--perhaps ultimately by undertaking the entire project themselves, but perhaps something less than that. If the Government do not give a project particularly high priority, they would be right to ask the private sector to take a far greater share of the risk. At present, we have an extremely inflexible system, the result of which is that hundreds of thousands of Northern line users will be inconvenienced for a long time to come. That does not seem to make any sense. Does the Minister wish to intervene ?
Mr. Dorrell : I am grateful to the hon. Lady--[ Laughter. ] I beg the hon. Gentleman's pardon. He alleged that there is a blockage because the Government require the operators to take a risk on revenues, but that is not the position. The Government published in the Official Journal the terms of a competition to determine which supplier would make the best offer in terms of replacing Northern line rolling stock. Is the hon. Gentleman arguing that that step is otiose ?
Mr. Darling : Earlier the Financial Secretary was confused about the age of his son. Now he appears confused about my sex. I wonder if he is also confused about Government policy on the public and private sectors.
I have no objection to competitions or to tendering. The Government have said that they want the operators of the trains to accept a revenue risk, but I entirely see the operators' point of view : they do not know about the business of running trains. If they have an interest in only one particular line and not in others, it is difficult to see how they can reasonably be expected to take such a risk unless they are given some say in the fare structure and in marketing, so as to protect the risk that they are running. Clearly, the Government must be flexible about any strategy for attracting public-private sector initiatives. If a bridge is to be built across a river, the Government may adopt a view different from the one that they would take if it was just a case of providing rolling stock for one section of one line. The Government must be open about these matters and must be prepared to show flexibility. I would never argue that the Government should not press the private sector to make as much of a contribution to the risks as it possibly can. I know that those behind the Jubilee line extension wanted the Government to take the lion's share of the risks. I accept that the Government were right in that case to stick to their guns and ensure that the private sector took its fair share of the risk. No one should be dogmatic about these issues ; it is just a case of what is right for the circumstances.
Mr. Dorrell : I entirely agree with the hon. Gentleman about the need for flexibility--it is an important point. He was arguing earlier that an unnecessary delay was being built into the Northern line acquisition by the Government's stance. The delay, if it be delay, is caused by the Government's insistence that potential suppliers enter into a competition. I want to establish whether the hon. Gentleman accepts that competition should be the next stage. If he does, he cannot argue that there is a delay.
Mr. Darling : There is a delay by definition--because the Government have decided to hold a competition. I am glad to see that that is common ground. This is not just my
Column 828complaint : many Members representing London constituencies, together with the Evening Standard and numerous members of the public, all know about the misery of using the Northern line every day- -and they consider that the Government have caused the delay. To say that the Government must be prepared to show flexibility is not to say that the private sector should not be pressed as hard as possible when it is right that it should assume a far greater risk. In certain other projects, such as the Northern line, it is important that the Government strike a realistic balance.
Mr. Brian Wilson (Cunninghame, North) : Does my hon. Friend agree that, whatever the Minister says, there has been an inordinate delay in getting to the point of holding the competition ? The reason for that has been the Treasury's obsession with the idea that risk must take the form of operating risk--as well as maintenance risk, to which the operators are prepared to agree. Does my hon. Friend further agree that if the Minister is saying categorically that the Treasury is no longer insisting on operating risk as an element of the contract, that will be good news for everyone ?
Mr. Darling : I do not believe that the Minister was saying that-- indeed, he seems to be shaking his head. I think that we can take it that the Government are indeed insisting that operating risk should be part of the package.
Mr. Dorrell : It is one of the issues that will determine the result of the competition.
Mr. Darling : My hon. Friend the Member for Cunninghame, North (Mr. Wilson) makes his own point, and now the Minister appears to accept it. There has been an inordinate delay, but this is only one of many projects in which there has been delay, caused partly by the fact that the Government are not clear in their collective mind about what their approach should be.
There seems to be some confusion about where the Government stand. I appreciate that they have travelled a long philosophical road. Five years ago, under the previous regime, such talk would not have been allowed. At that time, the idea of a public-private sector partnership was not to be tolerated : the private sector knew best--that was all there was to it. We have had this list of 78 projects, of which 43 are mere proposals and, as such, cannot be relied on as part of a comprehensive Government strategy. We should recall that these projects were announced by the Chancellor on a wet night in Glasgow last September. Perhaps they have the same status as the Chancellor says the Tory promises of tax reductions had when it came to the last Budget--it is just that one list was delivered on a wet night in Glasgow and the other in Dudley. They cannot be relied on. Two of the projects are, in any event, for car parks--highly desirable, no doubt, but scarcely the stuff of economic regeneration. They cannot be said to be priorities, but perhaps we shall hear more about them this evening.
The Government will say that it is unfair of me to blame them for everything that has gone wrong, and that the private sector has also made mistakes in the past. Others would argue that this business ought to be left to the private sector and that the public sector has no role to play. I recognise that there have been failures on the part of the private sector to invest in areas which fall within its own domain.
Column 829These matters are perhaps outwith the scope of this debate, but the Government can take a lead. They set the tone and the economic framework. For example, they determine the takeover policy which has led to companies being forced to pay out heavy dividends to fight off takeovers--dividends which could have been deployed for investment. The Government should have a view on corporate governance, which can have a heavy influence on the culture of investment.
Institutional investors also have a lot to answer for. Those who saw last night's BBC "Panorama" programme must have despaired on hearing reports that banks, pension funds and other institutions are again investing heavily in property, despite two spectacular collapses in the past 20 years. It is not just a private matter : money invested in property is, by definition, not available for other investment, and property collapses which leave banks badly burnt are paid for by the public through increasing bank charges. It is high time the whole culture of investment in this country and the behaviour of some people in the City was questioned--not just by members of the public, but by the Government. Perhaps the Financial Secretary, who has hinted in a series of speeches that he is concerned about such matters, will say something about them today. We need projects which can be implemented quickly, as well as projects which can enhance long-term efficiency and competitiveness. Projects should provide an acceptable rate of return, taking account of employment effects as well as straight cash terms. The Government have encouraged a culture in which high dividend payouts have taken priority over research and capital investment, which has seriously damaged our competitiveness. For that reason, it is for the Government now to show a lead in promoting public-private sector initiatives that will begin to redress some of the balance. We understand that only now, after 15 years, are the Government examining companies' behaviour with regard to dividends ; only now has the Financial Secretary started to take an interest in the matter from the Government's point of view.
What about privatisation ? No doubt we shall be hearing something about that. On average, about 20 per cent. of after-tax profits are paid out in dividends, but nearly 45 per cent. of the after-tax profits of the privatised utilities--water, electricity and gas--have been paid out in dividends. That is more than twice the figure for other companies. Yet we are asked to believe that privatisation leads to the best investment decisions. We know that that is not the case. We cannot leave such important matters, particularly matters of infrastructure, to private sector judgment alone. There are areas in which the private sector can operate best, but in many others there is a public interest--a public interest that has been neglected over the past 15 years. So far, we have seen no evidence that the Government are prepared to tackle seriously and reverse the problems that have occurred in the 15 years during which they have been in power.
There are other problems to be addressed. There is, for instance, the question of risk. As I have said, a flexible approach is needed. Risk does not come only in cash terms ; there is the question of the Government's acceptance of planning and legislative risks, for instance. There is also the question of the public sector borrowing requirement, as