Examination of Witnesses (Questions 120
- 139)
WEDNESDAY 21 JANUARY 1998
Mr J Mortimer, Treasury Officer of Accounts, further
examined.
120. You can understand from a taxpayers'
point of view, it would have been an even better bargain if they
could have had it for nought? It could have been free.
(Mr Tilt) I can also point to the
fact that the public sector part of the Prison Service has reduced
its costs against the private sector by 2 per cent each year in
the last three years. If you want to add all that up, that runs
into much larger sums of money than we are talking about.
121. I am not interested in that, I am interested
in this decision.
(Mr Tilt) We get a useful competitive
pressure in the public sector from the development of a private
market.
122. But you could have kept the competitive
pressure by buying the other prison with the money you saved.
(Mr Tilt) No, because it would not
have been a privately constructed prison then.
123. You could have put it to ministers
and said, "Look, ministers, we can save an awful lot of money."
Did you inf.orm ministers that you had made a decision to turn
down a £44 million saving?
(Mr Tilt) We informed ministers
of the details of both contracts at the time that the contracts
were being concluded, yes.
124. So ministers were aware of this and
endorsed it. So we have 44 million which you decided you would
not use for other purposes or save the taxpayer, and that is a
consideration that some of us --
(Mr Tilt) I have not --
125. You have already agreed to the 44 million.
(Mr Tilt) I have not agreed to the
44 million at all. I have agreed to the 19 million. The piece
between 19 and 44 is entirely speculative. There is no evidence
to suggest that Securicor would actually have delivered a 5 per
cent saving on both contracts.
126. I suspect you must be a big venturer
on the Lottery because you seem to --
(Mr Tilt) I do not play the Lottery
actually.
127. You don't? Well, you seem to have an
instinct for taking chances.
(Mr Tilt) My job involves balancing
risks, certainly, yes.
128. You did not want a second prison built
by Securicor because you were afraid of the risk, but you were
not afraid of risking £266 million of public money in building
the first one, were you?
(Mr Tilt) We thought that was a
reasonable --
129. That was a risk, was it not?
(Mr Tilt) Of course. Everything
is a risk. Everything I do is a risk. We thought that was reasonable.
We were satisfied with the proposals that Securicor had put to
us for the prison at Bridgend. We were concerned that asking them
to deliver two of those prisons at exactly the same time-to build
them at the same time, to build them to those very tight schedules
and to open them up successfully-was too risky. That is a judgment
and you have to make those judgments.
130. It seems to me that the taxpayer has
little reason to thank you, but certainly Group 4 and Tarmac have
every reason to be glad for what seems to be a gratuitous £44
million hand out of taxpayers' money.
(Mr Tilt) I repeat, I do not accept
the £44 million figure. I think the taxpayer has reason to
thank us for the efficiencies which have been delivered in the
public sector over the last three years which amount to very substantial
sums of money. I do not think those efficiencies would have been
delivered without a small private sector market, which is what
we have got.
131. That is a value judgment.
(Mr Tilt) Yes.
132. One can say in a very competitive market
they would have been gasping for contracts, so I do not necessarily
accept that. Did you get more bidders than you needed in the subsequent
contracts?
(Mr Tilt) I think we had about five
bidders in each contract.
(Mr Wilson) Yes, and there is further
evidence of continued downward pressure as people respond to the
results of the first competition and the Lowdham Grange competition.
For a similar 800-place new prison to be built in Greater Manchester,
the estimated net present value on the basis of the bid we have
already announced from the preferred supplier shows a 22 per cent
saving against Bridgend. That is approximately equivalent to the
amount of money you have been talking about.
133. Are you saying they would not have
been in there making those same bids if you had saved taxpayers
£44 million on the first contract? That is not logical. They
would have come in even lower; not encouraged by the high price,
they would have come in lower.
(Mr Wilson) As a secondary benefit:
developing the market, contractors have come forward with new
designs and more competitive prices. We are reaping the benefits.
134. There are other choices as well. We
have to look at options. Mr Tilt, I know you have problems with
staffing as well, and that 44 million is equivalent, at the price
you say you have to pay (and I recognise you pay more than the
private sector does for its staff), £20,000, to 2,200 staff
years. That would have given you an extra 1000 [6]
members of staff for the next 22 years, all at no extra cost to
the taxpayer. Did you work any of these possible options out?
"Do I want more men? Do I want a free prison?"
(Mr Tilt) The difficulty with the
discussion we are having is that we are starting from different
points. You are talking about 44 million, I do not accept the
44 million.
135. You did a while ago.
(Mr Tilt) No, I did not. I have
never accepted the 44 million.
136. You did when you spoke to Mr Leslie.
(Mr Tilt) I accept that if you believe
Securicor would have delivered a 5 per cent reduction, then the
figure would be £44 million. I have never believed that.
I repeat, in the next competition which came along, Securicor
offered 2 per cent, they did not offer 5 per cent.
137. The other reason you put forward for
your caution on two was the reduction of risk. We had a presentation
just a couple of weeks ago on the way in which PFI works and the
glowing value of it, in addition to the fact you get contracts
up-front, is that you transfer risk from the public sector to
the private sector?
(Mr Tilt) Yes.
138. Let's carry on with paragraph 2.13.
You decided strategically not to award both contracts because
"... the risks associated with the early stages of a new
prison's operations would place too great a demand on Securicor".
They were going to bear the risk, were they not?
(Mr Tilt) The risk of it not operating
well.
139. Yes. They would have had to pay you
if it did not work.
(Mr Tilt) In financial terms, but
if there is a riot in the prison I am still left with a deficiency
of that number of places and the need to start putting those people
into police cells. It has been a cardinal feature of our policy
to try to avoid the use of police cells. There are huge budget
problems with that for us and there are other problems with using
police cells. One is that they provide, in my view, quite unsatisfactory
conditions for prisoners, they are appalling very often, and on
top of that of course they take police officers off the streets
where they should be working to reduce the levels of crime. So
it is very important for us that we do not get into the situation
where these places end up in serious trouble and we have to move
prisoners out and put them in police cells. It is not simply a
financial risk.
6 Note by Witness: The extra number of members of staff
for the next 22 years should be 100, not 1,000. Back
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