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Mr. Jacques Arnold: On a point of order, Madam Deputy Speaker. On several occasions, the hon. Lady has said that she would give way to me in a moment. Could you, Madam Deputy Speaker, tell us what a parliamentary moment is, as I fear she has not the guts to give way?
Madam Deputy Speaker (Dame Janet Fookes): Order. Whether an hon. Member gives way is not a matter for the Chair.
Ms Harman: I have just remembered that every time I have given way to the hon. Gentleman previously, he has asked me questions that had nothing to do with the issue that we were debating. I reminded myself not to waste my time, or that of the House, by answering his questions.
Mr. David Lidington (Aylesbury): We have been treated to a speech of quite stunning disingenuousness by the hon. Member for Peckham (Ms Harman). We have heard a series of criticisms of the private finance initiative, which is now beginning to deliver benefits to my constituents and those of other right hon. and hon. Members, but we have heard not one scrap of detail about how the Opposition propose to alter the rules of the PFI to bring about the remedies that they claim are now needed. We have seen a rather feeble attempt to gloss over the differences between the hon. Lady, with her avowed hostility to the whole concept of the private finance initiative, and her deputy, the hon. Member for Rother Valley (Mr. Barron), who--rather than decry the PFI--wishes to claim authorship of it for himself and for his party.
Mr. Bob Dunn (Dartford): Surely the differences are not just between hon. Members on the Front Bench but between the hon. Member for Peckham and the local Labour parties in Dartford and Gravesham, which fully support the private finance initiative in the construction of a new hospital on the Darenth Park site. The hon. Lady must know that because she has made inquiries, but she has not raised that point today. That tells me that she knows that there are no votes in the line that she is taking in the constituency of Dartford.
Mr. Lidington: My hon. Friend makes his point well.
We also heard a series of criticisms from the hon. Member for Peckham of the reduction in planned tax finance capital expenditure on the NHS in the plans published in the Budget for the financial year 1996-97. We did not, of course, hear that, even at that reduced level, capital spending on the NHS in the next financial year would still be some 50 per cent. higher than the level that the Conservative party inherited from the Labour party when we took office in 1979.
I listened very carefully to the hon. Lady's speech and I noticed that, once again, while she criticised the Government for alleged parsimony in the capital funding of public services, she was careful to make no commitment on the part of herself, her Front-Bench team or her party to increase by one penny, let alone by the billions of pounds which she claims are needed, the amount that a putative Labour Government would be prepared to spend on the NHS. The Opposition are prepared to talk in a way that encourages expectations, but again and again they refuse to spell out the cost and how it would be met.
Dame Elaine Kellett-Bowman:
Is that not exactly what the disabled persons thought when they went to Labour party headquarters? The Labour party does a lot of talking, but it does not give much commitment.
Mr. Lidington:
My hon. Friend puts her points in as forceful and telling a manner as usual.
Nor would one guess from listening to the hon. Member for Peckham that capital projects under the traditional Treasury route have often been subject to prolonged delay and change stretching over many years. That applies to hospitals, roads and railway projects. It is inherent in capital spending, which is dependent on Treasury finance, that it becomes subject to the exigencies of overall Government priorities for public spending. The fate of individual projects can depend on the horse trading that takes place each year between spending Departments and the Treasury on which area of the Government's overall programme should get priority for that financial year.
I want to talk briefly about the project that I know best--the one approved for the South Buckinghamshire NHS trust Amersham and High Wycombe hospitals. Although they are located just outside my constituency, they serve a great many of my constituents as well as those of my hon. Friends the Members for Wycombe(Mr. Whitney), for Beaconsfield (Mr. Smith) and for Chesham and Amersham (Mrs. Gillan).
As the hon. Member for Peckham pointed out, the South Buckinghamshire NHS trust was putting together proposals for a major capital building programme before the latest private finance initiative was launched. The project, approved in the Budget statement last year, will deliver new hospital facilities much more quickly than local people had dreamt was possible, had they had to take their turn in the queue at the Treasury door, via the traditional funding route. Moreover, the design of the new buildings, and their location, not to mention the way the various facilities will be distributed between the two sites at Amersham and Wycombe, will deliver higher-quality clinical services than would have been achieved under the plans originally drafted by local management using the
traditional Treasury funding route. It is clear to me from my recent talks with local trust managers and clinicians that they unanimously welcome the PFI, as hastening the prospect of top-quality hospital facilities for local people.
We have heard Labour party criticism of the alleged laxity of financial controls in the NHS--the alleged risk of money matters going wrong. Having looked at the projects planned in Buckinghamshire, I find it difficult to understand how anyone could believe that. I have seen the proposals for new buildings crawled over, first by the trusts and their advisers, then by the regional health authority, then by the NHS executive, then by the Department of Health and Treasury officials--all to make sure that the right safeguards are in place and that the outcome will be good NHS provision to suit the needs of local people, at a price that will deliver value for money to the taxpayer.
As the PFI progresses, there are still some difficulties to be resolved. It is a new procedure, and I am sure that Ministers will want to learn from experience of the first projects so as to be able to improve procedures as the initiative takes hold and gathers pace.
I should like to direct the Under-Secretary's attention to two points in particular. First, I hope that Ministers will always be alert to the need to avoid detailed discussions getting bogged down in the sort of Treasury-Whitehall theology that has delayed projects in the past. As an example, I offer the distinction between a finance lease and an operating lease. A finance lease amounts to providing borrowing to pay for an asset, and that would count within the public sector borrowing requirement. An operating lease is defined as a payment for a service which may include the acquisition of a building and it does not count in the PSBR. I hope that we can avoid lengthy arguments between groups of accountants in various public bodies; such disputes can slow down the attainment of an objective on which everyone is fundamentally agreed.
Secondly, I hope that my right hon. and hon. Friends will look closely at hospital trusts that may want to apply through the PFI for funding for construction--and perhaps maintenance--of buildings, but not necessarily for the management of facilities also. It will be precisely the hospital trusts that have made the greatest progress towards contracting out many of their ancillary services which may find it more difficult to let a single contract to a PFI partner for the management of those services in future.
Mr. Brian Sedgemore (Hackney, South and Shoreditch):
When I heard the Secretary of State speaking, I was reminded of the questions that Tony Hancock asked himself shortly before he committed suicide: "What does it all mean? Why I am here? Where are we going?" He answered the questions as follows:"I don't know. I don't know. I don't know." The Secretary of State spoke for 50 minutes, telling us that this Bill changed nothing. I should hate to listen to him moving the Second Reading of a Bill that did change something.
Let us imagine the scene. It is Tuesday 27 February, late evening. The shadow Secretary of State for Health is at home after a hard day. She is lost in reverie; suddenly her whole world looks like crashing in--the telephone rings. There is a man on the other end of the line. His voice is cracking and he seems close to tears. It is the Secretary of State for Health. He says, "Harriet, I'm in trouble--you've got to help me. You're my friend, aren't you?"
The Secretary of State then pulls himself together and explains that he is being blackmailed by a bunch of bankers--three times tonight he used the term, a bunch of "shysters". They are, it seems, blackmailing him into passing the Bill as part of a wider negotiating package. They are telling him, "We are business men, not risk takers." There is panic in the right hon. Gentleman's voice. He says that the Bill is to be published tomorrow, and that Second Reading must be on 5 March--last Tuesday. The Bill must be through the House by Whitsun.
The shadow Secretary of State for Health stands firm, however, and is not seduced by the blandishments of a Secretary of State who is clearly trying to con her over the telephone in the middle of the night. Some people may think this story apocryphal; it tells the House what the Bill is all about.
Then, on 4 March, the Secretary of State for Health comes before the Treasury Select Committee to be questioned about the Bill and the private finance initiative. He is usually elegant and composed, but last week he look frazzled--he had obviously had a sleepless weekend. He told us that the bankers still would not sign the PFIs, and that they wanted the Bill, together with other negotiated settlements that present hurdles which he still cannot get around.
The questioning has scarcely begun when this suave, assured, sophisticated Secretary of State suddenly loses control. I know, because I was there asking him the questions. I have the transcript with me. My question, directly related to the Bill, was about the power of trusts to borrow and about how liabilities that the Secretary of State has to meet can be built up. I asked:
The Secretary of State replied:
At that point, it was as though an electric charge had gone through the Select Committee. Everyone sat bolt upright in utter amazement. I was gobsmacked, to borrow a phrase usually used by the Governor of Hong Kong. Perhaps the right hon. Gentleman had misheard the question. So, with incredulity tinged with sarcasm,I repeated it:
The Secretary of State replied:
I am absolutely amazed by that double assertion on the part of the Secretary of State. I have in front of me a copy of the National Health Service and Community Care Act 1990. Under the heading "Borrowing", paragraph 1 of schedule 3, on the financial provisions relating to NHS trusts, states:
The Secretary of State said twice in succession that NHS trusts had no powers to borrow. We have a Secretary of State who does not know what is in his own legislation, who does not understand how trusts operate, who does not understand how schemes are paid for and how liabilities, which he will guarantee in the Bill, are built up. That is astonishing. It is incredible. By any standards, it is extraordinary.
I have been a civil servant, a parliamentary private secretary--a bit of a dogsbody--and a Member of the House. I have seen Secretaries of State who are ignorant. I have seen Secretaries of State who are very ignorant, but never before have I seen a Secretary of State whose ignorance measures force 12 on the Richter scale. That is hurricane-level ignorance. The Secretary of State's behaviour seemed a bit like that of an A-level student about to take his English examination who does not know his ABC. It was a bit like a plumber walking into a house to mend a cistern and saying that he had forgotten his tools. These were basic facts that we would expect a Minister to know.
I wonder what the civil servants who were at that meeting thought about it. When I was in the civil service, we expected our Secretary of State to go to the Dispatch Box and put on a good performance. We expected our Secretary of State to go to a Committee upstairs properly briefed with all the answers. After all, there were hundreds of us providing the Secretary of State with every single bit of information. A triumph for the Secretary of State was a triumph for us, and a failure by the Secretary of State was a failure for us. As the Secretary of State displayed this astonishing ignorance, he debased and demeaned not only his civil servants and his office but the Department for which he worked.
It is worse than that. I asked how much trusts could borrow, and how great, by way of borrowing, were the liabilities that he was prepared to undertake under the Bill. Because he does not know that a trust can borrow, I imagine that his answer is "None." Paragraph 3 of schedule 3, on limits of indebtedness in relation to trusts, which the Secretary of State thinks cannot borrow anything, reads:
only England--
This Secretary of State, apparently, is prepared to allow trusts to borrow £10 billion under his own directions without knowing what it is about. That is why there are people like me--people who have fiduciary and fiscal probity--on the Treasury Select Committee. I have seen whole Governments collapse because they borrowed£10 billion more than they should have. Yet this whiz kid, who used to work for the Treasury, goes to the Department of Health and is prepared to see trusts borrow £10 billion and know absolutely nothing about it. What on earth is happening to our country? Is it any wonder that we are a backward, fractious island off the coast of north-west Europe, with a culture that is in irreversible decline?
Why is the Secretary of State so ignorant? My hon. Friend the Member for Peckham asked that question. One answer to that is that ignorance is quite often born of arrogance and laziness. That reminds me a ditty by Cole Porter:
To be fair, the Secretary of State may not be the laziest man in town, but everybody in the House now knows that he is the laziest Secretary of State in Whitehall. He has made indolence an art form. If Marlowe was right when he said,
one of the biggest sinners in the world would be the Secretary of State for Health.
The point that I want to make is that the Secretary of State continued to say that nothing could ever go wrong, that no trust would ever get to a situation where it might have many liabilities to meet, and in any case he would honour them however and wheresoever they had been caused. I shall give one example of the problems that we might face. It relates to the PFI of the Royal Hospitals NHS trust. The PFI is six, seven, eight, nine or 10 times bigger than anything that has been mentioned tonight; it is for £260 million to close St. Bartholomew's hospital and build a new 750-bed hospital in Whitechapel.
It is generally agreed that the private finance initiative is flawed, and therefore that there could be liabilities after this huge sum of money has been invested. How do I know that it is flawed? First, one of the senior figures at the East London and City health authority--the purchaser--told one of the members of the Treasury Select Committee, and I put this to one of our witnesses at the hearing, that the project was not financially viable. That is the kind of thing that my hon. Friend the Member for Peckham is saying. If someone puts in £260 million and the project is not financially available and the trust goes bust, who will pick up the tab? The Bill says that it will not be the contractors and the people who will build and manage the hospital.
We do not need simply to take the evidence of a senior figure who works for the purchaser. The financial viability was question by the York Economics Consortium, which consists of some of the most prestigious health experts in the country. It said, when expressing doubts about the capital and revenue estimates of the PFI, which will probably have to be bailed out by the Bill:
The purchaser is saying, "Here's a PFI that can build up liabilities which the Government may have to pick up from the private sector." The York Economics
Consortium is saying exactly the same thing. There is also a third body, the King's Fund, which commissioned the CASPE Consulting report, which said:
I break off there. One hundred people from the private finance world seeing £260 million coming into their hands have said that they are interested. Of course they are interested. They will be particularly interested if the Bill is passed and their liabilities are picked up if and when things go wrong.
The report continued:
the outline business case--
Those three prestigious groups, the purchaser, the York Economics Consortium and the King's Fund, which produced the original documentation on which the private finance initiative was based, are all now saying that this is a major scheme--by the standards of everything that the Secretary of State has told us, a mega-scheme--which could go horribly wrong. If it goes horribly wrong, the private finance consortia will want the Bill. They are another group of bankers who will not sign unless they get the Bill.
The Government, in effect, are promising the private finance consortia two things. First, they are promising them the Bill and, secondly, they are saying behind our backs--I put it to the Secretary of State and he said that he knew about it, and I also put it to Gerry Green, the chief executive of the Royal Hospitals NHS trust--"We can get around this because, if we get the Bill and we have got them to sign the private finance initiative, we can increase the size of the hospital from 750 to 1,020 beds."
That requires a new outline business case. The public have been told nothing about that. If I had not raised it at a meeting of the Treasury Select Committee, no one would know it even now. It would require a new outline business case and new consultation. Therefore, this is a process to avoid the new outline business case and the new consultation. It is all predicated on first getting the Bill through and then getting the private finance consortia to sign.
"Can you tell me, the trusts have the power to borrow, do they not?"
"No, that is incorrect."
"The trusts do not have the power to borrow?"
"The trusts do not have the power to borrow."
"(1) Subject to the provisions of this paragraph and to any limit imposed under the following provisions of this Schedule, for the purpose of its functions an NHS trust may borrow (both temporarily, by way of overdraft, and longer term) from the Secretary of State or any other person."
12 Mar 1996 : Column 832
"(1) The aggregate of all sums borrowed by NHS trusts established to assume responsibility for the ownership and management of, or to provide and manage, hospitals or other establishments or facilities which are situated in England"--
"shall not exceed £5,000 million or such other sum not exceeding £10,000 million as may be specified by order made by the Secretary of State with the consent of the Treasury."
"It's not 'cause I shouldn't
It's not 'cause I wouldn't
And you know it's not 'cause I couldn't
It's simply because I'm the laziest man in town."
"there is no sin but ignorance",
"The preferred option generates an additional saving of £9m at the cost of almost £100m in additional capital spending. For this additional capital cost to be justified, the revenue benefits of the incremental spend must be reasonably secure.
We believe that there is sufficient uncertainty around the estimates of net revenue savings . . . that the magnitude of the assumed difference in costs between the options is extremely sensitive. Since this difference is, in any case, relatively small in relation to the total revenue expenditure of the Trust . . . further evidence is needed before the additional capital expenditure of £100m required to move from a do minimum to a single site solution can be justified on a purely financial basis."
"Business people are used to taking risks, but of a calculated sort. The Trust is expecting to start negotiations with Private Finance Consortia soon."
"Even on the figures in the OBC"--
"it would appear wise for any of the possible consortia to check whether the CASPE Consulting St. Bartholomew's Foundation option incorporating new partnerships would not produce better returns and do so much more quickly . . . even the preliminary work undertaken to date suggests that a complete reconsideration and development of a new Foundation option, incorporating the service proposals of both NHS and non NHS partners, would be wise and be likely to produce a better solution for the NHS."
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