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the Minister's assumption--that just, because child minders represent the growth area in child care provision, they are what most people would choose. That is not necessarily true.

The Financial Secretary said that he himself had chosen to use a child minder instead of a nursery. I made the opposite choice : having used a child minder, I opted for a private day nursery. But many people in my constituency do not have that choice. They have to use child minders because there are no nursery places.

There should be a fiscal regime that encourages the public and private sectors to consider ways in which money can be invested in this sort of project. Perhaps one sector could provide the capital and the other pay for the running costs of a nursery. Perhaps one or other could pay for certain staff--there are a range of ways in which, given the will, joint funding arrangements can be made.

We are losing because the private sector is discouraged from considering these options by our current tax regime.

Mrs. Teresa Gorman (Billericay) : Does the hon. Lady agree that, if we could persuade the Treasury to allow the cost of child care provision to be offset against earnings--tax relief on the cost of child care, in other words--that would be enormously helpful to women ? It would also encourage the growth of new jobs--a whole new type of occupation for people who are out of work at the moment.

Mrs. Kennedy : We certainly need to consider every conceivable suggestion that might encourage child care provision to meet the growing needs of working mums and dads. The hon. Lady's option is one that should be considered--and would be, if we were developing the strategy whose details the Financial Secretary requested earlier.

Mr. Beith : May I remind the hon. Lady that that option was considered a little earlier this evening, when the House voted on new clause 6 ? As far as I can recall, neither she nor the hon. Member for Billericay (Mrs. Gorman) spoke about or voted for the new clause, which would have achieved precisely what they have asked for.

Mrs. Kennedy : I did not vote for the new clause because I do not agree with the idea of tax vouchers--but they should certainly be debated. It was the right hon. Gentleman's right to table the new clause, and mine not to vote for it : and I did not.

Ms Abbott : Is not nursery provision an excellent candidate for private/public sector partnership ? It is easy enough for the Financial Secretary to say that child minders are meeting the need, and there are many excellent child minders about ; but in inner-city areas such as my own --Hackney--and, for instance, Liverpool, child minders are struggling to look after children in inadequate living conditions and with insufficient training and support. Tomorrow morning, many a woman will take her child to a child minder with a heavy heart : she would be much happier if she had the option of taking her child to a high-quality nursery.

Mrs. Kennedy : My hon. Friend is absolutely right. Although the child minders whom I have used throughout my working life have, after months and years of acquaintance, become close personal friends whose help I

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have always appreciated, I am aware that some of my friends have not had the same experience. Child minders are not the answer to most people's problems, as the Financial Secretary suggested.

10.15 pm

Finally, let me say a word about the cost of nursery education. The Rocking Horse day nursery, which provides a marvellous service for the staff of Alder Hey hospital, charges £15 per whole day. In small projects like that, public/private sector partnerships would allow the public sector to provide more subsidies to help with child care costs.

I hope that the Financial Secretary will consider all the issues that I have mentioned. I feel that he replied too quickly to points made earlier, and I trust that he will deal with the serious matter raised by the new clause.

Mr. Keith Hill (Streatham) : All the speeches that we have heard-- not least the impassioned contribution of the hon. Member for Macclesfield (Mr. Winterton)--have suggested that joint private and public sector projects could provide a useful way of supplementing infrastructure development, and that there is growing interest in the subject, as well as growing consensus between the parties. As some Opposition Members have already pointed out, the concept has long been expounded by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott), whose proposals for leaseback arrangements for certain railway projects on the French model were included in Labour's manifesto at the time of the last general election.

It goes without saying that my hon. Friend's eminently sensible proposals were consistently rejected, derided, condemned and shrugged off by a succession of transport and finance Ministers. They must now find themselves rather shamefacedly having to eat their words, following the Chancellor's welcome and important commitment to the private finance initiative in his Budget statement of 30 November 1993, in which he announced a number of new projects under the initiative, confirmed the establishment of a new working group chaired by Sir Alastair Morton and concluded that the Government had

"injected a new momentum into the private finance initiative."--[ Official Report , 30 November 1993 ; Vol. 233, c. 933.]

I am bound to say, however--given that the Conservative Benches have been singularly barren throughout most of our proceedings--that that momentum has not exactly set the Conservative party in Parliament alight.

Hard on the heels of the Budget statement, Labour published its own report on the issue, entitled "Financing Infrastructure Investment" and subtitled "Promoting a Partnership Between Public and Private Finance". That detailed consultation document set out a number of areas in which public and private initiatives could be undertaken through the creation of public interest companies, new relationships between Government and public trading bodies, the possibility of regional development banks' mobilising private finance into small and medium-sized firms and--critically--a review of the current distinction between operating and finance leases, a subject to which I wish to return.

The report makes clear Labour's commitment to private and public initiatives across a range of policy areas and beyond transport infrastructure alone. It says that Labour's concept of public-private partnership is "ambitious and expansive"--as my hon. Friend the Member for Edinburgh, Central (Mr. Darling) precisely enunciated.

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We on this side of the House know, and the country knows, where Labour stands on this issue, which is the subject of new clause 13. Notwithstanding the Chancellor's fine words in his Budget statement, are we entirely sure where the Government stand on this issue ? Has it finally been resolved in the Chancellor's favour inside the Treasury ?

In his Budget statement, the Chancellor said that making a success of the private finance initiative would require "a complete change of culture within Government". Certainly the Treasury's grudging response to the recent London Underground Northern line offer by ABB Transport seems to suggest that this cultural change still has a long way to go.

It is rather tempting to believe that the Treasury was wrong-footed on this issue precisely because it was a private rather than a Government initiative. But despite the very clear benefits of the deal--a totally new fleet of trains on London's misery line for the first time since world war two ; a 20-year operating lease financed by the private sector ; the total value of the scheme amounting to in excess of £700 million, which could certainly not be funded in present circumstances by London Underground ; and most of the new fleet in place by 1997--the Treasury dragged its feet for three or four months before it announced that it consented to the commencement of the tender process.

One is also tempted to think that its consent was influenced more by the political pressures generated by the highly effective campaign of the Evening Standard , as well as the imminence of the London local elections, than necessarily by a change of heart--a new conviction--on the part of the Treasury.

Nevertheless, the contract has now gone out to tender. I think that most of us who were involved in the campaign accept that making the announcement through the Official Journal was inevitable, and probably the correct procedure. But if the deal goes ahead, whichever company wins it, it will doubtless reflect the main features of the ABB offer.

So far, so good. Members of Parliament on both sides of the House, and all Londoners, were delighted with the progress achieved in the Secretary of State's announcement of 29 March. Notwithstanding the Secretary of State's announcement, some nagging doubts are emerging about the fine print in the Government's response.

These nagging doubts raise the question : was this merely a tactical concession on the part of the Treasury to avoid a short-term political embarrassment, or, at the heart of the Treasury, does there remain a fundamental resistance to this kind of scheme which jeopardises the whole approach to public and private finance initiatives--the subject of the present debate ?

The Treasury has laid down two tests which such initiatives must pass : the value for money test and the risk transfer test. The essential element of the value for money test is whether it is apparently cheaper to fund within public sector borrowing requirement rules or through a private finance initiative.

Under the test, if it is apparently cheaper in total value for money terms to purchase through the public sector route, the private finance proposal is deemed to have failed. I emphasise that, under the test, a proposal is deemed to have failed, irrespective of whether Government moneys can ever have been made available for the project. That is clearly ludicrous.

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Following the 1993 Budget, London Underground deferred indefinitely its Northern line modernisation scheme, and further cuts in public support may be in the offing. If it is left to public sector financing, there is no prospect in the foreseeable future of the investment like that offered by ABB, and possibly other sources, being made available to London Underground.

There is no acceptable alternative to the scheme. The refurbishment project, which we understand has been touted in the Treasury as an alternative, has few benefits and perpetuates many of the disadvantages already experienced by Londoners travelling on the misery line. A failure to acquire new Northern line trains through the private finance initiative would be an absolute loss to the London travelling public. I hope that the Financial Secretary will offer a firm assurance that there is no question of this absurd and irrelevant yardstick being applied in the final assessment of the bids under the tendering process.

The second test applied by the Treasury to the private finance proposals that we are debating is the risk transfer test. The essential measure is whether most liability for asset ownership over the life of a project transfers to the private sector. The questions are how much risk, and what kind of risk ? This is perhaps where we find the source of the main anxieties about the Treasury's approach. The Secretary of State for Transport's announcement of 29 March, the contractual details of which have now appeared in the Official Journal , set out two aspects of risk-taking by potential bidders. First, the private sector would be required to finance the cost of trains and to provide a complete maintenance and support system. Secondly, any deal would

"have to transfer a substantial degree of risk to the private sector in order to meet the Government's criteria under the private finance initiative".

The first requirement seems entirely reasonable in any such joint private- public venture. It seems reasonable that a manufacturer in this case--or any manufacturer, for that matter--should undertake responsibility for meeting the risk of performance of the rolling stock that he is producing as well as for possible cost overruns and delays. Indeed, such an undertaking, together with a maintenance deal, was already on offer from ABB Transport.

What seems by contrast quite unreasonable is the fact that the manufacturing company should assume responsibility for the many variables on which revenue returns are dependent and which lie entirely outside its control. For the Government, that means the level of public subsidy for transport services, and for London Underground management, it means factors such as staff costs, fare levels and even marketing.

However, that apportionment of risk now seems to lie at the nub of the argument and may be the obstacle that the Treasury is laying in the path of this new and exciting private financing initiative. The fact is that it is a matter of subjective decision-making. No fixed scale of risk transfer is laid down on projects of more than £10 million.

London Underground has estimated the percentage risk transferred with the ABB Transport project at 70 per cent., and it is satisfied that the project is merit worthy with a 6 :1 benefit-to-cost ratio. Is it really the case, as some commentators suspect, that the Treasury wants to transfer the totality of risk to the private sector ? Surely--this point

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has been made by many other hon. Members-- the heart of the public-private sector joint project concept lies in the sharing of risk.

It is eminently acceptable that the public sector should bear a part of the risk because the gains from a decent public transport system, or decent public services in general, cannot be captured in higher fares and higher charges--higher charges if one wishes to impose them. Decent transport and decent public services are a public good and private and public deals should reflect that fact. If it is not recognised, such deals will not happen because there is nothing in it for the private sector. That may, of course, be precisely what the Treasury is looking for.

We are entirely clear that we are talking about risk sharing and sweeping away the cobwebs of obsolete thinking. However, we need answers from the Financial Secretary. Is the requirement for revenue risk in the Northern line project an absolute stipulation or, as the Secretary of State for Transport implied in evidence to the Select Committee on Transport, a general requirement that would be of interest, but would not be a make-or- break criterion for going ahead with the project ? We need to know the status of that requirement. Much depends on the Financial Secretary's response.

10.30 pm

If the Government do not sort out the issue, if they intend entirely to privatise risk in such projects, that will sink the chances of the entire private finance initiative. That would be bad news for the Government, but- -it is rather more important--it would be bad news for London Underground passengers and passengers elsewhere in the country, who would have to wait another two or three years until the next general election, after which a start will made on the modernisation of Britain's transport infrastructure, with a Labour Government genuinely committed to a partnership between public and private finance.

Mr. Dorrell : Anyone listening to the debate, if he had no reason to know better, could be forgiven for thinking that during the past 15 years the country had been run by a Government motivated solely by the aim of keeping the private sector out of the delivery of public services. From the speeches that we have heard it would have been reasonable to draw the conclusion that the idea that the private sector has a role to play in the delivery of public services was a new idea launched by the Opposition.

That is the exact opposite of the truth. For 15 years the Government have been involving the private sector in the delivery of services that in 1979 were regarded as the exclusive preserve of the state. British Telecom, water, electricity and gas are parts of the infrastructure now vested in the private sector, free from the public sector constraints that Opposition Members profess to find objectionable.

If the Labour party is serious about wanting to involve the private sector in the delivery of public services, surely to goodness that is a Damascene conversion on a truly biblical scale. It involves eating the words that have been spoken from the Opposition Benches for the past 15 years.

Mr. Wilson : Will the Minister give way ?

Mr. Dorrell : No, I will not.

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The use of the private sector in the delivery of public services goes to the core of what the Government have sought to do for 15 years. That is why over that period, in addition to the privatisation programme, we have used the private sector to deliver the Dartford crossing and to build the second Severn bridge, and to engage in the largest civil engineering project of our age--the channel tunnel. It is absurd for the Opposition to talk about their interest in the private sector as the deliverer of public services.

In the 1992 autumn statement

Mr. Wilson rose

Mr. Dorrell : No, I shall not give way.

In the 1992 autumn statement, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) made it clear that he wanted the private finance initiative to be used to extend further the role of the private sector in the delivery of public services. The Opposition's argument this evening has been that the results of that initiative have been sparse. That is hard to square with the facts. Since the 1992 autumn statement, private sector operators have been able to compete for the building of two new prisons. We have made it clear that we are extending to the private sector the opportunity to replace the Scottish air traffic control system. There has been a substantial investment in a myriad small projects in the national health service, involving private capital and management. The private sector has invested in student accommodation, as part of the expansion of our university system.

It has been involved in the future planning of the road system, through the development of road charging and the opportunity for shadow tolling, which was foreshadowed in a statement made by the Secretary of State for Transport only last week.

The principle of the Government's position is absolutely clear. The private sector has made it clear that it wants to be involved, and believes that it can contribute to the better delivery of public services. We, on behalf of the public sector, want to see its expertise and its resources recruited to the better delivery of public services. Changes on that subject are not required on this side of the House. It is on the Opposition Benches where the truly difficult questions remain to be faced. The hon. Gentleman

Mr. Wilson : On a point of order, Mr. Deputy Speaker. Will you confirm that it is within the rules of a debate for a competent and confident Minister to give way during that debate, rather than simply to read from a prepared

Mr. Deputy Speaker (Mr. Michael Morris) : Order. The hon. Gentleman has been in the House long enough not to need that sort of ruling.

Mr. Dorrell : The best that the Labour party has been able to do to substantiate its proposition that private finance is an issue that it may call its own has been to quote the speeches of the hon. Member for Kingston upon Hull, East (Mr. Prescott) on leasing to British Rail before the last election. Frankly, the hon. Member for Kingston upon Hull, East is condemned from his own mouth. He described his own idea as one concerned with accountancy not socialism. That is precisely the problem for the Labour party on the subject. The problem has been grasped by the hon. Member for Hackney, North and Stoke Newington (Ms Abbott). She wrote to The Independent soon after the document about which the hon. Member for Edinburgh, Central (Mr.

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Darling) waxed so lyrical, drawing attention to the difficulties of the document published by Labour Front-Bench spokesmen. It is interesting to quote to the House the writings of the hon. Lady. She argued that :

"private sector involvement in public sector investment has all kinds of problems that neither Gordon Brown nor The Independent seem to appreciate. It is a more expensive way of raising money and the private sector invariably wants to take all of the profit and none of the risk."

She went on :

"the involvement of private sector personnel and practices in the public sector seems to bring with it a risk of sleaze and corruption."

In the hon. Lady's eyes, the private sector is identified directly, apparently, with sleaze and corruption.

The key point came in the next sentence of the hon. Lady's writings. She said :

"Above all there is a danger that the private sector will by degrees affect the priorities and the policies of a Labour Government in relation to public expenditure."

She is, of course, exactly right. That is what involving the private sector means. It means bringing in not only capital, but management and accepting that people other than the Government have a perspective on improving the delivery of public services.

For 15 years, the Government have been opening the public sector to private sector skills and disciplines. During the whole of that time, Labour has resisted the process and identified public service with public provision. At last, we have seen the first signs that the dinosaur may be blinking. Labour has finally noticed that, while Government reforms have been giving customers better quality service and taxpayers better value for money, Labour policy has been stranded in a cul-de-sac. Fifteen years after the Government stamped on its tail, apparently the message has finally reached the dinosaur's brain. For that, there is much mercy, but little celebration.

Mr. Darling : The Financial Secretary's reply must surprise many people who thought that he was the coming man of the moment for the Conservative party. Instead of dealing with the arguments advanced, not only by Labour Members but by two of his hon. Friends, he has engaged in a rant which, frankly, does not do the subject any justice at all. We are entitled to ask where the Government stand on the question of public- private sector partnerships. The Financial Secretary seemed to be attacking its very principle, yet the Government say that they are in favour of developing further partnerships.

All that we have seen from the Government is a list--cobbled together, I suspect, 24 hours before the Chancellor gave a speech in Glasgow in September--of projects. Many of those will never see the light of day, but are simply glints in the planners' eyes. Others have been completed.

However, there was no evidence that the Government have any idea of a clear strategy on how to approach the problem. It is a piecemeal approach. The Government say that they are building two new prisons, and that they are building a Scottish air traffic control centre. I remember when the Chancellor announced that Scottish scheme, because it took many people in the air traffic control industry in Scotland completely by surprise. They had never heard of the project before. Yet the Government were saying that it was one of the centrepieces of the then autumn statement.

We have known for a long time that the Government have no strategy for economic investment. It is now

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abundantly clear, however, from what the Financial Secretary has said that they do not even have a strategy for promoting public-private partnerships.

The Financial Secretary complains about what my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said before the last general election. He still condemns what my hon. Friend said. Yet the Government, having condemned what Labour candidates said during the election, went on to adopt the very same policy only a few months later.

It is not surprising that people do not have confidence in what the Government say. It is clear from what the Financial Secretary says that the Government do not know what they are doing from one moment to the next. They say that they are in favour of public-private sector partnerships, and the next day they say that they are not. The Financial Secretary made no attempt to deal with the arguments advanced by the hon. Member for Macclesfield (Mr. Winterton), who made an excellent speech ; I would not disagree with one word of it. I might suggest to him, however, that he should be complaining about the dead hand of Treasury Ministers, not that of the Treasury. It is Ministers who decide, and it is Ministers who should be held to account for the bankruptcy of policy in this area.

Many of my hon. Friends have said that it must make sense to invest in the infrastructure that the United Kingdom desperately needs if it is to compete with the rest of the world. My hon. Friend the Member for Ashfield (Mr. Hoon) referred to the Government's appalling policy and lack of foresight in respect of telecommunications super highways. My hon. Friend the Member for West Bromwich, East (Mr. Snape) talked about desperately needed infrastructure, including a specific metro scheme. In the area which I represent in part, Lothian regional council s metro scheme has been sidelined by Government policy.

As for timidity, I make no apology for the Opposition not being timid about the Government's policy. We believe that public-private initiatives are one way in which our country can begin to regenerate and rebuild its infrastructure, which has been neglected for the past 15 years.

If we are serious about maintaining and sustaining a high level of employment, surely rebuilding our infrastructure will enable people to go back to work to undertake that task. That must be a project that is well worth supporting. Yet what do we get from the Government ? The answer is absolutely nothing. They heap scorn on anyone who comes up with any new ideas. They are hidebound by the dogma that has caused so much decline and misery for the past 15 years.

The Financial Secretary has made several speeches and written several articles. He has let it be known among the press that he is a new thinker, and that he is prepared to consider proposals that hitherto the right-wing members of his party were not prepared to contemplate. He has even hinted that there is something to be said for a consensus between the parties on economic matters where that makes sense. We have heard nothing about that tonight.

The Financial Secretary is supposed to be examining British industry's policies and problems on and with dividend payouts. We have heard nothing about that. He says that we should rely on the Government's privatisation proposals. He did not respond to our complaint that the dividend payments of the privatised utilities are double that

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of most other companies. That is money that should be available--we were told that it would be available--for rebuilding the privatised utilities' infrastructures. The Financial Secretary said nothing about that.

It is not surprising that, when the Labour party published "Financing Infrastructure Investment" earlier in the year, it was welcomed both inside and outside the House. It is not surprising also that, when the party held a conference to discuss the matter, it was heavily over-subscribed.

People said to us repeatedly, "Is it not surprising that the Government have no idea how to conduct an economic policy ?" The Government live from day to day and minute to minute. They have nothing to say to those who believe that Britain must compete with the rest of Europe and, indeed, the whole world. To do that we must rebuild our infrastructure, which has been neglected because of the free market dogma that has dogged the political system for the past 15 years.

If the Financial Secretary is supposed to be the man of the future, it is not surprising that more and more people are coming to the conclusion that the Conservative party is the party of the past, and that it will be thrown out of office at the next election. Question put , That the clause be read a Second time :

The House divided : Ayes 260, Noes 297.

Division No. 215] [10.44 pm


Abbott, Ms Diane

Adams, Mrs Irene

Ainger, Nick

Ainsworth, Robert (Cov'try NE)

Allen, Graham

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Ashton, Joe

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Beith, Rt Hon A. J.

Bell, Stuart

Benn, Rt Hon Tony

Bennett, Andrew F.

Benton, Joe

Bermingham, Gerald

Berry, Roger

Blair, Tony

Blunkett, David

Boateng, Paul

Boyes, Roland

Bradley, Keith

Bray, Dr Jeremy

Brown, Gordon (Dunfermline E)

Brown, N. (N'c'tle upon Tyne E)

Burden, Richard

Byers, Stephen

Caborn, Richard

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Campbell-Savours, D. N.

Cann, Jamie

Carlile, Alexander (Montgomry)

Chisholm, Malcolm

Clapham, Michael

Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Coffey, Ann

Cohen, Harry

Connarty, Michael

Cook, Frank (Stockton N)

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Corston, Ms Jean

Cousins, Jim

Cox, Tom

Cummings, John

Cunliffe, Lawrence

Cunningham, Jim (Covy SE)

Cunningham, Rt Hon Dr John

Dafis, Cynog

Dalyell, Tam

Darling, Alistair

Davidson, Ian

Davies, Bryan (Oldham C'tral)

Davies, Ron (Caerphilly)

Davis, Terry (B'ham, H'dge H'l)

Denham, John

Dewar, Donald

Dixon, Don

Dobson, Frank

Donohoe, Brian H.

Dowd, Jim

Dunnachie, Jimmy

Dunwoody, Mrs Gwyneth

Eagle, Ms Angela

Eastham, Ken

Enright, Derek

Etherington, Bill

Evans, John (St Helens N)

Ewing, Mrs Margaret

Faulds, Andrew

Field, Frank (Birkenhead)

Fisher, Mark

Flynn, Paul

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