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Mr. Peter Viggers (Gosport): Opposition Members believe in public-private partnerships. The Minister is seeking to encourage private involvement in Government matters, but how would that work in practice? There is, for instance, a strong suspicion that private sector involvement in English Heritage's imaginative scheme to preserve Stonehenge and make it an exhibition caused it to be turned down by the Secretary of State for National Heritage. It is suspected that some Ministers do not believe in private sector involvement. Can the hon. Lady comment on that?
Ms Armstrong: I speak on behalf of the whole Government when I say that we do support public-private
partnerships. The Bill deals with them in local government, and local government already has a proud record of effective public-private partnership deals that have been conducted in a manner different from the way in which, according to the former Government, private finance initiative deals have been conducted in the past.
The Bill is a specific short measure intended to address the problems that have arisen in the securing of contracts that have the confidence of both the public and the private sectors, and it is on that basis that we wish to act. I am afraid that other issues must be taken up with relevant Secretaries of State, but, as I have said, the Government as a whole are committed to effective public-private partnership arrangements.
Mr. Christopher Chope (Christchurch):
I thank the Minister for her kind remarks. In reincarnated form, my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) and I look forward to plenty of enjoyment as the hon. Lady and the Government face the consequences of dashed expectations among their local government supporters.
Although I have spoken in Committee, this is the first time that I have spoken in the House since my election on 1 May. I begin by paying tribute to the hard work of my predecessor, Mrs. Maddock, for her constituents following her by-election victory in the previous Parliament. She was my councillor when I was the Member for Southampton, Itchen and I now enjoy the responsibility of being her Member of Parliament. Her commitment to local government issues can best be judged by the fact that during the general election campaign, which ran in parallel with Dorset county council elections, many constituents thought, albeit mistakenly, that she was their county councillor.
When I was first elected as a councillor in 1974, the aldermanic system still operated and the person whom I defeated immediately became an alderman. People in Christchurch await with interest to know whether Mrs. Maddock will be appointed to the parliamentary equivalent of aldermanic status--membership of another place.
The Opposition support the generality of the Bill. I understand that we probably would have introduced a Bill in not dissimilar terms if we had been in government. The Bill complements the Local Authorities (Capital Finance) Regulations 1997, which were introduced by the outgoing Conservative Government to facilitate partnerships between local government and the private sector.
We welcome the Government's conversion to the private finance initiative. I am the first to admit that the Minister's conversion goes back many months if not years. In the case of the Secretary of State for Health, we await hard evidence that there has been such a conversion. When he was Labour's spokesman on the environment, he criticised the Conservative Government and
emphasised the limits of the PFI approach. Old Labour used to regard the PFI as the son of privatisation and, therefore, to be despised. However, it seems that such attitudes have changed and the Opposition welcome that.
The publication today of the conclusions of the Bates review of the PFI is encouraging. One of its conclusions states:
Today's announcement is yet another example of the Labour party behaving in government as if it were still in opposition, rearranging the deckchairs without making any substantive improvements. It beggars belief that the way to inject greater urgency into the PFI should be to give the public sector more control and to put the Treasury in charge.
Ms Armstrong:
Would the hon. Gentleman like to remind the House how many PFI hospital buildings were in the pipeline and how many the previous Government managed to secure? My information is that not a single hospital was agreed, and that means that no building has taken place in the national health service in the past three years.
Mr. Chope:
I am not an expert on all the hospital projects, but I do know this: annexed to today's Government statement is a list of PFI projects that are under way and in process as a result of Conservative Government policies. From recollection, I think that the value of those projects extends beyond £700 million, which is a large investment and a tribute to the previous Government's work.
We know that there was a hiccup over some of the NHS projects, which was why a special Bill was drafted and brought in by the previous Government--[Interruption.] It was prepared by the previous Government for introduction and it has been adopted by the present Government. I have no complaint about that,
but let us not rewrite history. Indeed, the list of the PFI deals signed before April 1997, which was released by the Treasury, shows that the PFI was making good progress. All that has happened in the past few weeks is that some PFI projects have been put at risk and others have been put on hold.
The Minister of State implied that the problem that the Bill addresses is a lack of private sector confidence, and that she wishes to restore it. We should not allow this occasion to pass without reminding ourselves of some of the reasons why that private sector confidence was lost. It was lost because of the behaviour of councils under the control of old Labour. In the late 1980s, Hammersmith and Fulham council engaged in some £6 billion of money-market gambling, speculating with its ratepayers' cash, but that council was acting ultra vires and, as a result, it avoided having to pay back more than £100 million that it owed to banks and financial institutions, after making massive losses in interest rate swaps and option deals. Not surprisingly, having had their fingers burnt in that way, the banks and financial institutions were loth to lend to local authorities just on their say-so. There were other cases involving guarantees by local authorities, which, again, were found to have been entered into ultra vires.
Will the Minister confirm that the entry into capital market transactions on a speculative basis by local authorities remains, despite the Bill, ultra vires and that such transactions cannot be certified by the procedures as set out in the Bill? Will the Government confirm that the Bill does not alter the fact that local authorities can go bankrupt? Will the Minister confirm that central Government are not and will not be a guarantor of the debts of local authorities?
The Bill refers to a minimum length of contract to which its procedures will apply. Will there also be a maximum length of contract, because some of the deals that are being contemplated potentially involve fettering the discretion of councils over many decades?
The Bill does not vest local authorities with powers of general competence, but perhaps the Minister will tell us what the Government's plans are in that respect. Many Labour local authorities have been seeking such powers for a long time, and they will obviously be disappointed that the Bill does not legislate for them.
What is the scope for local authority guarantees to financiers? On a number of occasions, local authorities have been tempted to give guarantees for the performance of partnership deals to financiers and thereby impose on their taxpayers the contingent liability in respect of those guarantees. We know that the Treasury is reluctant to give--indeed, wholly opposed to giving--such guarantees in relation to general Government expenditure unless those guarantees count against the public sector borrowing requirement, but are the Government minded to provide a relaxation of the capital expenditure rules under section 40 of the Local Government and Housing Act 1989 in respect of guarantees given by local authorities? At the end of the day, the issue is the extent to which taxpayers will be protected against the actions of their councils when they act ultra vires.
There are many questions for the Government to answer in this debate or perhaps in more detail in Committee. Will the Bill ensure that there is a mass of new local authority partnership schemes? Certainly,
we hope that that will be the case. Indeed, that is why provision was made for £50 million in the past financial year and for £200 million this year. We hope that those schemes will be brought forward.
"The Government should take an early opportunity to make a confirmatory announcement of its commitment to PFI as one method of conducting successful public-private partnerships."
My hon. Friend the Member for Gosport (Mr. Viggers) questioned the Government's commitment to the PFI, and he can draw support from the implication in that conclusion from the Bates review that up to now the Government have not confirmed their absolute commitment to the PFI. The Minister for the Environment is quoted as having said on 16 May in relation to design, build, finance and operate schemes:
"I do think there are problems with DBFO. One of which is finance. The operator provides the money up front, but the payback period is very considerable and that is a constraint on future public expenditure."
The Minister was expressing the underlying Government doubts about the PFI. Far from reinvigorating the PFI, the Government have allowed it to drift for many weeks. Seven weeks after peremptorily sacking the chairman of the private finance panel, the Government have still not appointed anyone to take charge and drive the PFI process forward. There will now be yet more delay before a chief executive is appointed to head the new Treasury private finance task force. Only last week, the Minister of Transport announced, not to the House in a statement, which he should have done, but in a written answer, a moratorium on new road building projects, putting DBFO schemes at risk--so much for speeding up the PFI.
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