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7.40 pm
Ms Armstrong: I beg to move, That the Bill be now read the Third time.
It is with great pleasure that we come to the Third Reading of what I admit is an exceptionally complex Bill. None of us is certain that what we want from the Bill is what we will end up with. Unfortunately, that is the nature of such legislation. The previous Government had much experience of that with a Bill on the national health service and the private finance initiative. In the week in which the election was called, they admitted that that Bill did not meet the needs that they had intended it to meet. We are now considering a further Bill relating to that.
It is important to restate what the Bill does and what it does not do. Its purpose is to remove an obstacle to successful local authority public-private partnerships.
The Bill does not change the fundamentals of the law. It does not add to local authorities' existing powers. Equally, there can be no question of it rendering ultra vires transactions that have always been within authorities' powers. It merely makes explicit what was already implicit: that local authorities can enter into contracts in pursuance of their functions.
Mr. Tony Colman (Putney):
May I declare an interest as chair of 4 Ps--the Public Private Partnerships Programme--and ask my hon. Friend whether she would support an experiment, a pathfinder project, for the use of PFI in HRA housing. I believe that that could lead to best value, and 4 Ps has established that there is support from financial institutions. Would my hon. Friend support such an experiment?
Ms Armstrong:
I am grateful to my hon. Friend, who probably has more experience than any other hon. Member of the matters covered by the Bill. I should be happy for the Government to work with 4 Ps on a pathfinder project for housing. We are always looking for
The Bill deals with a certification procedure, which does not permit authorities to act ultra vires. It does not give them immunity from challenge in public law by a taxpayer for entering into deals that are outside their powers. It does not restrict the auditors' right of challenge.
The certification procedure enables authorities to say to contractors, and to financiers who are backing deals, that, to the best of the authority's knowledge and belief, the deal in question is within powers.
The Bill also provides contractors and financiers with the assurance that if, at some later stage, there are proceedings to enforce the contract, the authority will not then be able to claim that the deal is ultra vires. However, should the deal none the less be found to be ultra vires, the authority will have to recompense the other parties to the contract.
For those reasons, the Bill has been welcomed by the finance community. The other partners are also extremely important.
What is in the Bill for local authorities? First, it provides a valuable clarification that statutory powers carry with them a power to enter into associated contracts for assets or services, or both.
Secondly, the Bill means that authorities will be able to give assurance to potential partners in innovative partnership schemes that if, after certification of a scheme and in the unlikely event of the scheme nevertheless being found to be ultra vires as a result of a challenge in public law, the provider and the bank will be protected. The local authorities understand that. They know that they will have the responsibility to ensure that schemes that they enter into are within their powers.
It has been suggested that certification will be too burdensome, and will entail additional requirements. We do not believe that it will be complicated or burdensome. It should reflect the process of considered assessment that an authority will have to go through in any case, and which an authority should undertake before entering any partnership agreement.
The certification process will focus specifically on powers. For that reason, it is not the appropriate vehicle for giving assurance about other matters, important though those may be. It need not be cluttered up with details of risk transfer, procurement processes, planning matters and so on. The authorities should address those issues, but in another context.
We do not believe that certification adds to officers' liability. I know that that has been a particular concern of local government officers and of Liberal Democrat Members. On the contrary, by clarifying authorities' powers, the Bill is likely to reduce the risk that officers entering into contracts, especially innovative partnership deals, might inadvertently act ultra vires. Signing the certificate carries no more liability than signing the contract to which it relates.
There is every reason why local authority officers will act in good faith in going about their business. If they act in good faith, honestly and without malice, they will have nothing to worry about.
I welcome the hon. Member for Brentwood and Ongar (Mr. Pickles) to the Dispatch Box, and apologise for not doing so earlier. It is one of the better innovations of the
new Conservative party that Back Benchers are being encouraged to join Front-Bench teams on appropriate occasions. This is such an occasion. It is a pity that the hon. Gentleman has been left on his own--no, I see the that hon. Member for Eastbourne (Mr. Waterson) is also present, and I welcome him. I am sure that his support is of great encouragement to the hon. Member for Brentwood and Ongar.
It might seem entirely reasonable for parties to contracts to agree not only to the issue of certificates, but to their content. However, any amendment along those lines, although apparently innocuous, would destroy the Bill's good effect. If contractors and banks had to agree that schemes were intra vires, rather than just relying on the authority's opinion, they would be tied into the decision-making process. They would have to form a view, when they would prefer not to do so. Not only would contractors and banks not be well placed to form an opinion, but they would have to exercise due diligence in expressing a view. The Bill aims to protect financiers and contractors in the unlikely event of authorities' making a mistake about whether contracts fall within their powers.
Mr. Eric Pickles (Brentwood and Ongar):
I thank the Minister for her kind remarks. I forgive her for not making them earlier--no doubt she was struck dumb by the sight of me at the Dispatch Box. I also thank the hon. Lady and the Minister for London and Construction for the courteous way in which they conducted business in Committee.
I agree with my hon. Friend the Member for Christchurch (Mr. Chope): it is a great pity that we have not heard much from Government Back Benchers in this debate. It is also a pity that the hon. Member for Putney (Mr. Colman) did not serve on the Committee. Committees are often stuffed to the gills with people who know nothing, and care even less, about the subject under consideration. The hon. Gentleman is an expert on whom we could have leaned. We could have listened to his advice, and probably concluded our deliberations much sooner. I hope that he will speak on this subject in the future--in fact, I look forward to hearing from him in a few moments.
This is an uncontroversial Bill, and we shall not divide the House on it this evening--although it is not terribly wise to send Labour Members home just yet. The debate on the Bill was quite exciting. At times, I expected to see great shafts of light issuing from the ceiling and cherubim and seraphim dancing in it, because this is the stuff of the road to Damascus. The Government have a new enthusiasm for private finance initiative projects. In the past few years, I have listened to Labour Members of Parliament and parliamentary candidates describing the wickedness of the PFI, which they called a waste of taxpayers' money.
However, there is now a new enthusiasm for the PFI. PFI projects worth about £7 billion are in the pipeline, thanks to the Conservative Government. I recall Labour Members' cynicism about the PFI and the vitriol that they aimed at it--but that was then, and this is now.
The Government have embraced existing legislation that was prepared for a Conservative Government, which complements perfectly the 1997 local government capital finance regulations. Hon. Members referred to several high-profile court cases that sent a shiver down the back of the banks and financial institutions. Partnership agreements were found to be unenforceable and banks suffered losses, seriously harming confidence in local authorities as serious risks.
We have heard a little about the Waltham Forest and Allerdale cases. Contracts that had been entered into were found to be null and void because the local authority lacked the necessary credits. The repercussions were quite serious. The company had no recourse to legal action, and was saddled with considerable bad debts. The company in the Allerdale case is pursuing individual councillors as company directors. I have some sympathy--as do Labour Members--for those councillors who sought professional advice and were badly let down by their advisers.
The Bill provides clarity where there was doubt, and parties now know where they stand. The public will know where they stand, thanks to a concession secured by my hon. Friend the Member for Christchurch that will ensure that documents are open for inspection.
I have referred to the road to Damascus, but perhaps it might be better to regard the legislation as the manifestation of a crate culture in the Labour party. Hon. Members will recall that, during the second world war, the American air force parachuted crates on to remote Pacific islands in order to look after their fliers who might be stranded there. The islanders created a new religion from that activity, and the same sort of thing is happening with the PFI. The PFI is being bandied around the Chamber as the solution to every problem: if we need a new hospital, call for PFI; if we need a new tube network or a new school, call for PFI. The scheme seems to have no limitations.
However, the PFI has limits. It transfers the risks, and offers the opportunity of new finances for public services. That risk transfer allows the release of provisions that were needed in order to deal with that risk. However, although the PFI brings new finance, it certainly does not bring new funds for local authorities. It is simply a rescheduling of debt. New funds can be created only through the release of real resources--and the PFI does not do that.
During the recent debate on the future of the London underground, I likened the PFI process to that of a person buying a home: the building society provides the finance, but the purchaser provides the funds. Companies that enter into contracts with local councils will be seen to enjoy a special relationship. We must consider carefully the way in which the Bill will operate in practice. We must be absolutely certain that no special favours are shown to those who enter into contracts with local authorities.
When that issue was considered in Committee, the hon. Lady referred to local authorities as having the powers of planning authorities and of those who enter into contracts. She seemed to suggest that that situation was well
established. However, she has since retreated from that position. In her winding-up speech today, she said that there was no need to consider the situation, as it was well established.
I have read her remarks in Hansard, and I believe that we will have to re-examine the matter in another place by way of certification and through greater openness because of problems with planning gain. The situation is slightly different from that suggested by the hon. Lady. Earlier this year, the Department of the Environment issued a circular, which made it clear that,
"To retain public confidence, such arrangements must be operated in accordance with the fundamental principle that planning permission may not be bought or sold. This principle is best served when negotiations are conducted in a way which is seen to be fair, open and reasonable".
What better way to achieve to achieve that than in the process of certification?
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