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6.57 pm
Mr. Clive Betts (Sheffield, Attercliffe): The Government have presented the Bill because they feared that they could not get PFI schemes off the ground in the health service, as the banks and other private sector organisations would not enter into liabilities which they were not sure would be picked up by trusts that might not exist in 20--or, indeed, 70--years from now.
The Secretary of State for Health told the Select Committee on the Treasury about a lacuna in the legislation. That was his word, not mine, and I was not sure what "lacuna" meant, until I looked it up in the dictionary. The Secretary of State obviously uses the word frequently to describe his problems.
He said that the problem had been around since the 1940s, and that it was everyone's responsibility. That is not true, because in the past, borrowing for the public funding of projects in the health service has meant that trusts and hospital boards have not had any difficulties. The PFI scheme has raised difficulties because of the different way in which such schemes are entered into compared with borrowing through the old mechanisms.
To underline that point, while we finally got it out of Secretary of State in the Treasury Select Committee that trusts are free to borrow, he went on to say that they are not free to pledge assets. That is why there has not been such a problem in that past. By and large, financial organisations have been willing to lend to trusts only if the loans are backed by the security of the property on which they are lending. That security has always depended on the say-so of the Secretary of State. That is the fundamental difference, and the reason for the Bill. It shows that a control mechanism exists for borrowing through the traditional route that is not there for borrowing through the PFI.
While the Government hope that the obstacle will be removed to allow projects to go ahead, in fact the system presents obstacles all over the place to the setting up and construction of new hospitals and additions to hospitals. Much administrative time is spent on comparisons between PFI and public schemes.
Ask the chief executive of Royal Hallamshire hospital, Sheffield about what happens. He got the go-ahead for its Stone Grove project to replace a rundown mother-and-baby and gynaecological service in 1993. Not only has not a single brick been laid--not even an accountant's pen has been put to a contract for the scheme, because it is still being assessed three years after the original project was given the go-ahead.
If the PFI is cheaper, we must ask why. Again, evidence to the Treasury Select Committee showed that interest charges on private borrowing are 2 to 4 per cent. higher. The Government talk about risk transfer, but if the private sector takes on the risk, it will want the public sector to pay for it. That is right. It will want its risks in the project covered.
The Government will not tackle my worry that any savings from private sector projects will be produced in the same way as they have been with compulsory competitive tendering in local government, where 70 per cent. of savings result from cuts in wages and conditions of the lowest paid workers. That is why cleaning, building maintenance and management and other such activities will be part of the projects. The Government can deny that if they want, but that is the evidence from the Audit Commission on CCT in local government. I fear that the same savings will be made and be called efficiency savings, when they are cuts in pay and conditions.
The Government say that, if private sector funding is cheaper, we should go down that route, but there is a question mark over what would happen if public funding were cheaper. Is the public funding there? Royal Hallamshire hospital has asked me what would happen if its assessment showed that the public sector was cheaper.
There is no guarantee--the hospital thought there was, but it is beginning to change its mind--that there will be public sector funding, because the Government cut£2 billion from the budget estimates for capital infrastructure projects in November last year. A large amount of that £2 billion was taken from the health service. Even if the public sector route was cheaper, the hospital may not be built, because there would be no public funding. It is like a football match where the rules allow only one goal for a side to score in. Only one side could win. The Government have not tackled that.
It comes back to the fact that the Government have retreated from their initial position that the PFI means additional rather than substitutional spending. The game was given away by the Financial Secretary, when, in his final muddled words to the Treasury Select Committee, he said that the money was additional at the time that it was spent. In other words, PFI money is additional to the Government's £2 billion cut. Those are weasel words to disguise what they are doing.
From the delays in bureaucracy, it is clear that there are no controls over the system. It was accepted that there is no control system in the Treasury or Departments. There is only voluntary registration by trusts of schemes into which they have entered. That is not an effective control mechanism for money that has been committed for70 years--or for most schemes, 20 or 30 years--into the future.
The Minister said in an earlier debate that the PFI would be controlled by the external financing limit, but that is not true. It is true for publicly funded projects, because the capital charges are up front in the first year in which they are committed. They are not in PFI schemes, which involve charging for the provision of a service or the design or construction of a building over the years in which the service is delivered.
Often, when the commitment is made to enter into the contract, there is almost no expenditure in the first two or three years. In the years for which there is an EFL agreed by the House and promoted by the Government, there is no commitment. The commitment is made for years when there is no agreed EFL. It does not act as an effective control and monitoring mechanism. I should like the Minister to reply on that. He made that comment in a previous debate, but the controls are not there. We are committing money for years ahead, without democratic control or accountability.
There is a different sort of control over borrowing, in that organisations are usually prepared to lend only where there is a guarantee against a building. Trusts cannot at present pledge assets against borrowing. That control mechanism may not be very effective, but it is better than anything that exists for the PFI projects that the Government promote.
Sir Christopher Bland, the new chairman of the Private Finance Panel, admitted in evidence to the Treasury Select Committee that there was a built-in incentive to use the PFI route precisely because there are no financial control mechanisms in the first two or three years. There is no disincentive to use that route, because there is no control of over-expenditure in those years.
There are delays and lack of controls, and no additional funding is being provided, but in some ways the most serious problem is the impact on the choice of schemes that will go ahead. Because there is no guarantee of public funding to underpin the schemes, and because of the incentive to use the PFI that I have explained, we are effectively transferring the choice about which hospital projects go ahead from a public process done by democratic representatives to one where the private sector picks and chooses the projects that it wants to fund, design and build.
Some projects will not go ahead, not because of a public choice of priorities but because of a private sector choice. That is a complete handover of political responsibility to the private sector. It is disgraceful that a Government who talk about political sovereignty and role of Parliament should be prepared to hand such power to the private sector.
The privatisation goes further. Ministers must accept that, irrespective of what they say about clinical services not being privatised, that is precisely what is happening. It is happening to Royal Hallamshire hospital in Sheffield, according to its chief executive's evidence to the Treasury Select Committee. I do not know whether the Minister read it, but it frightened me. He said that the distinctions that the Government wanted to draw could not be drawn. Housekeeping teams are composed of people with clinical and non-clinical responsibilities. Management cannot be in the public sector for one and in the private sector for the other. That does not work in a hospital context.
Non-clinical people are being trained to do jobs such as taking blood samples. The trust is trying to enrich people's jobs and pass them more responsibility, under proper clinical training. What should be done with those people? Should we take away those responsibilities--or, when their jobs are privatised, is the totality of their work, including the clinical elements, privatised? Those questions have not been answered.
Further, services at Royal Hallamshire hospital, such as pathology and diagnostic images, are being transferred. Why are hospitals going to the private sector to fund such services? The chief executive's evidence to the Treasury Select Committee was clear. He said that it was because there is no longer any public funding to replace such equipment. He said that there was no choice but to privatise them, because clapped-out equipment could not otherwise be replaced. That is privatisation by the back door of clinical and non-clinical services.
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