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Mr. Luff: No, I shall not as that might try your generosity, Mr. Deputy Speaker. Some of the schemes are clearly aimed primarily at the private sector aspects of the fitness centre: fitness testing, health and fitness for50 years plus, sports injury rehabilitation and so on. However, there are some mainstream health facilities, including osteoporosis and arthritis care; respiratory, cardio pulmonary health and fitness and so on. That is the kind of innovation that can flow from the injection of
private finance into the NHS, and it will be threatened if the Bill--which goes to the heart of the private finance initiative--does not secure a Second Reading.
The Bill is very important for all those who live in south Worcestershire. The people have campaigned for30 years for a new hospital to replace the current three sites--one of which is the second oldest site in England where patients are still treated. The British Medical Association was founded on that site in Worcester many years ago. My predecessor, Lord Walker of Worcester, turned the first sod of the new hospital site in August 1993, but nothing has occurred since then. There has been a long battle to persuade the region about the business case for the hospital.
We now face the prospect of an excellent hospital with outstanding core medical facilities and a flexible number of beds. Everyone would benefit from the new facilities that the development would provide. The new Worcester hospital, for which my predecessor and I have campaigned so vigorously, must not falter because of a simple, technical issue that the House can resolve easily. That is why the Bill is important to me, to my constituents and to all those who live in south Worcestershire.
The private finance process is progressing well in Worcestershire: it is an example to other trusts round the country of how to achieve aims quickly and professionally. I am not prepared to let down the trust's hard-working managers and medical staff by allowing a problem at national level to thwart their attempts to advance the scheme quickly.
We face serious issues in creating the right commercial and organisational arrangements between the private sector and the NHS. However, the Bill clears away the main obstacle. There is an excellent team in Worcester, with a new chief executive, which is committed to making the private finance process work. It wants to pioneer a sensible deal that will combine the best of the national health service and the private sector, to bring the sorts of innovations that we have seen in Evesham in the past few months.
The trust has put out invitations to tender to three short-listed consortiums--Laser, Bovis and Bryants--and the bids are due to be received by 10 July this year. If all goes well--if there are no hiccups and the Bill secures its passage--the contracts should be signed this year.
Mr. Stephen Timms (Newham, North-East):
Notwithstanding what the article in the Financial Times said this morning, is the hon. Gentleman aware that the Secretary of State told the Treasury Select Committee that the Bill was not needed in order to complete those PFI deals?
Mr. Luff:
I am at liberty to disagree with my Front Bench--that is one of the privileges that Back Benchers have. I think that the Bill is important, and that is also the view of those to whom I have spoken in the NHS. They think that their financiers will require the security afforded by the Bill, and I am very happy to take their advice. I shall listen to my right hon. Friend the Secretary of State, but I believe that the Bill is important--and my local trust believes that also.
The contracts with the three consortia must be signed and every legal obstacle must be removed from their path. We must provide suitable health care to the people of my
county into the next millennium. Years of waiting can be brought to an end. The medical and clinical staff at the hospital deserve the full support of the House this evening, to ensure that the PFI helps them to deliver the highest-quality treatment for the patients whom they serve.
I looked at the reasoned amendment before the House and I despaired. It rests its case on the suggestion that there will be some
That is not how any Conservative Member sees it. We are committed to a public national health service, largely free at the point of delivery. If I thought that the Bill were a back-door route to the privatisation of NHS hospitals, I could not support it this evening. Private finance makes little or no difference to the basis on which health care is provided, but it will improve the quality of care, the range of services that hospitals can offer and the physical condition of hospitals.
Mr. Sam Galbraith (Strathkelvin and Bearsden):
I was disappointed that the hon. Member for Worcester(Mr. Luff), who spoke for quite some time, did not speak before the hon. Member for Colchester, South and Maldon (Mr. Whittingdale). He could then have read out the Conservative central office brief and that would have stopped him using his usual tactics for prolonging the debate. They include repeating what others have said, reading out the Bill, its clauses and the notes to the clauses and then speaking at great length about his constituency.
Nevertheless, the hon. Gentleman and other Conservative Members confirmed two of my worst fears about the private finance initiative. First, whatever anyone says, it is in part a substitute for Government funding. It is no longer additional funding. Secondly, it is yet another method of slowly but surely privatising the national health service.
I remain of the view that, as far as possible, the NHS should be provided and financed by Government. That is not always possible. The potatoes are not always provided. To use the same analogy as the Secretary of State, tonight's measure might turn out to be the potato Bill.
It is important that the Government provide as much as possible, otherwise, bit by bit, the national health service is gradually eroded. Every time they erode a little piece, it becomes easier to erode another piece and that leads to the slippery slope, the black-white shift of philosophy whereby what was unacceptable yesterday becomes acceptable today, not because the principle has changed, but because there has been a slow but sure philosophical shift.
Having stated my position, I realise that there are practicalities. We live in the real world, there are constraints on the public sector borrowing requirement and Governments have to take account of such influences as interest rates. Therefore, there may be a case for considering the private finance initiative, provided that it is used in the interests of the health service, the risk is shared and the investment is to the benefit of all.
The more I look at it, the more obvious it becomes that the PFI is biased against the national health service and protects the private sector. The Bill completely removes all substantial risk from the private financier and places the liability back in our hands. It makes it easy for the private sector to become involved because there is no risk. The Bill gives what is virtually a carte blanche guarantee to the private sector. Trusts will be able to borrow money from the private sector and the Government will pick up the liability. I cannot see how that will not be set against the PSBR.
I understand that parts of the private finance initiative will not be set against the public sector borrowing requirement, but given the contents of the Bill and the projects that have been mentioned, I cannot understand how the Secretary of State can accept completely free and open liability for money borrowed by trusts through the PFI without setting it against the public sector borrowing requirement. Therefore, the private sector would incur no risk.
The hon. Member for Worcester said that some risks would be incurred. Those risks have been set out before, but they are minimal. First, there is a delivery risk. Contractors would be responsible for every aspect of establishing the service on time. Any contractor who is worried about delivering on time should not be in business. Secondly, there is volume risk, whereby the contractor cannot expect a guaranteed income. That is part of business. Even potato producers do not expect a guaranteed volume and they also incur a delivery risk. Thirdly, there are obsolescence risks. There is even a potential obsolescence risk with potatoes. Finally, there are economic risks, as contractors are no longer protected by inflation indexed payments. Those risks are part of normal contractual arrangements. They are normal business risks that anyone would expect.
The Bill does not seek to protect risks that anyone in business would expect. It seeks to protect almost open-ended liabilities incurred by trusts. They are not payments out of the current account; they are capital risks that will have to be set against the public sector borrowing requirement.
The PFI has a long history. As the hon. Member for Colchester, South and Maldon, who read the Conservative central office brief, will know, it stems from the Ryrie rules that were established by the National Economic Development Council in 1981. They were designed to introduce private finance into nationalised industries, but they were very strictly drawn. They allowed public finance only if it was the cheapest option and the private sector carried the full risk. Those were two important criteria, and the Bill removes one of them. They were not viable because the private sector would not accept them on that basis, therefore they were amended over the years and eventually dropped.
They were replaced by the private finance initiative that was introduced in 1992 by the then Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont). He was quoted as saying that its purpose was
He made sure that it was biased in favour of the private sector and that any risks would fall on the Government. That is what the Bill does.
The PFI comprises a number of features, including the possible involvement of leasing arrangements. As long as a project was shown to be profitable, it could go ahead without having to be compared with similar public sector activity, but there had to be a sensible transfer of risk. It was reiterated that the private sector must genuinely assume the risk. That proved to be unworkable, because the private sector would not accept the risk, so the Bill removes all risk from the private sector and places it once again with the Government and the taxpayer.
The private sector will fail to realise the potential. Conservative Members who made pleas for their constituencies and said that the PFI is the way forward have false hopes, as do the Government. The only way that they can succeed is if there is no risk to the private sector--I do not believe that the Treasury or any Government who believe in prudent finance could allow that to continue.
The PFI is more costly than the public sector. We all know that it costs the private sector more to raise finance than it does the Government, at 3 per cent. to 4 per cent. The only way in which that money can be recouped is by leasing charges or--as increasingly happens, and this is where the PFI produces problems--support services, leading eventually to medical services. In other words, that means the privatisation of the NHS, which is the Government's long-term aim.
Mr. Peter Puplett, a former economist with Tarmac, said about any charge:
In other words, the Government cannot win--particularly if the Bill is passed. Yes, there are short-term advantages from the PFI and yes, immediate capital outlay is avoided--but the cost over the years, because of the charges inherent in the initiative, mean that in the long term, the PFI will be much more expensive. We will spend the rest of our lives paying for that which we apparently get for nothing today.
The PFI has no ability to establish priorities as to where the money goes, and with that goes a locked-in lack of flexibility. The Minister of State, Scottish Office who is on the Treasury Bench is responsible for the health service in Scotland, so he knows that Greater Glasgow health board leased under an initiative a large central office for its administrative services. Subsequently, the board's structure changed and evolution came about, and it no longer needed that office. Nevertheless, the board is locked into a 99-year lease, at massive cost, and it cannot
get rid of that liability. The contractor does not mind because it is getting the money. The liability has fallen back on us.
A company tamed Takare in Glasgow looks after the care of the elderly. That model is no longer appropriate and we want to change it, but we are locked into a 15-year agreement under a PFI. Flexibility has been lost, charges have been increased and we are heading slowly but inexorably towards privatisation.
"abuse of the Private Finance Initiative to advance privatisation of the NHS".
"to remove the unnecessary obstacles to private sector investment in Britain's infrastructure."
"On the one hand, it could be set too low and the private sector would not find it viable to finance the project. On the other, it could prove too high and the project would become a licence to print money. The latter risk is something feared by Treasury officials and ministers alike. It is the hidden handicap of the PFI and explains why so little progress has been made."
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