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1.16 pm

The Parliamentary Under-Secretary of State for Wales (Mr. Jon Owen Jones): I thank my hon. Friend the Member for Blaenau Gwent (Mr. Smith) for raising an important subject, and for doing so with his customary good humour and gentle use of irony. His speech was not only well researched but heartfelt. I also welcome the opportunity of replying to the debate, as it gives me a chance to outline the Government's progress on the private finance initiative, our further plans for its reform, and our wider commitment to developing public-private partnerships.

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My hon. Friend the Member for Blaenau Gwent said in his speech that he is particularly concerned about the effect and use of the PFI in the health sector. I know that he will not object--and I trust that you will not, Mr. Deputy Speaker--if I use this opportunity, as a Health Minister, to announce that I am today establishing a group under the chairmanship of Professor Ian Cameron, provost and vice-chancellor of the university of Wales college of medicine, to examine meningococcal infection in Wales.

The chief medical officer in Wales will nominate individuals with appropriate experience and knowledge to serve in the group, which the National Meningitis Trust and the Meningitis Research Foundation will be asked to join. I shall be asking Professor Cameron to report to me on the matter as soon as possible.

I thank you, Mr. Deputy Speaker, for allowing me to make that announcement.

Since the Government were elected to office, in May 1997, we have revitalised the PFI, so that we can now rightly say that it is a key tool in helping to provide effective and good-value public services. Since the general election, we have signed £4 billion-worth of PFI deals and have made the PFI work in sectors, such as health, in which it had not worked before.

We estimate that, by the end of 1999, private sector investment in PFI projects will account for about 14 per cent. of overall public sector investment. Accompanying the turnaround has been an upsurge in confidence, both in the public and private sectors, that the PFI can deliver the goods. We are now seeing its benefits spread to other parts of the public service, such as our schools.

The Government are working closely with local government to use the PFI to improve public services. The Welsh Office has made PFI credits available, amounting to £150 million, to enable our six local authority pathfinder schemes to begin. The schemes were chosen to provide templates for future projects in Wales, and we anticipate that the first deals will be signed in the next few months. Additionally, we have recently announced another £120 million of credit that will be made available, and have invited Welsh local authorities to make proposals on their next wave of PFI projects.

The transport sector led the way in the PFI. It is worth remembering that, a decade ago, my right hon. Friend the Deputy Prime Minister was first in proposing the type of public-private partnership arrangements that are now delivering the goods in transport. Schemes in progress include the chunnel high-speed rail link and dualling of the A55 across Anglesey. The Government are proud of our record on PFI, and we have been able to get it moving.

When we came to office, we were prepared to take tough decisions. For instance, in the NHS in England, we established a system to prioritise PFI projects to break the logjam that had been allowed to build up. Health service need now dictates which PFI projects get the go-ahead and, to date, 25 new hospital developments have been given the green light as part of the biggest hospital programme in the history of the NHS. Work on nine is already under way.

In Wales, we have made significant progress in getting PFI in health off the ground. Deals with a capital value of over £30 million have now been signed for projects ranging from staff residences and clinical waste disposal through to operating theatres and renal units.

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We are particularly proud that, through the PFI, the people of Chepstow will soon benefit from a new, purpose-built community hospital, replacing old, out-dated and worn-out accommodation.

Mr. Huw Edwards (Monmouth): I thank my hon. Friend the Member for Blaenau Gwent (Mr. Smith) for expressing the reservations that many people have had about PFI, and which some of us had when Labour was in opposition. Will my hon. Friend the Minister accept that the people of Chepstow, having seen delay after delay, are grateful that the Government are ensuring that the problems associated with PFI under the previous Government have been resolved to some degree, and that there will be a new hospital in Chepstow? Will he assure us that PFI will not be associated with a significant--or minor--deterioration in the pay and conditions of staff working in hospitals?

Mr. Jones: I am pleased to hear my hon. Friend's remarks. My father is a constituent of his and lives near the hospital site, and I know that the people of Chepstow have waited too long for the hospital to be developed. I can assure him that staff will be covered by the Transfer of Undertakings (Protection of Employment) Regulations 1981--TUPE--to safeguard their interests in any transfer of employment.

Mr. Llew Smith: Does the Minister accept that the question is not whether there should be a new hospital in Chepstow? Obviously, we all welcome that. The question is whether the hospital should be funded by public money or by PFI. Can the Minister explain why it needed to be a PFI project when 86 per cent. of the money could have been raised from the sale of the land? Is he saying that the conditions of staff in the long term will be protected, and that new staff will receive similar protection? Does he accept that this is privatisation of public services--a point we accepted as a party in 1995?

Mr. Jones: My hon. Friend made a number of those points in his speech, and I intend to address them in my speech if I am able to move on. The Chepstow PFI project was judged to be value for money with the land value included, and the treatment of the land in the deal was cleared by the Treasury.

The University hospital of Wales has been quick to grasp the opportunities that partnership can offer. Patients, visitors and staff are able to get on to the site and park much more easily thanks to a multi-storey car park and access road constructed through the PFI. A new entrance, concourse and reception area--again, built through the PFI--has improved enormously the environment and facilities for all users of the site, and has corrected long-standing problems dating back to the original design of the hospital.

The PFI is also helping the NHS to become increasingly energy-efficient. A significant number of NHS trusts are now entering into energy management contracts with specialist service providers and obtaining substantial savings which can then be reinvested in direct patient care. These important and valuable developments would have been very difficult, if not impossible, to achieve without partnership under PFI, and would have required us to divert scarce resources away from other health priorities.

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The previous Administration, under the right hon. Member for Wokingham (Mr. Redwood), actually took capital money away from the NHS in Wales and left us a legacy of aging and poorly equipped hospitals. We are working hard to restore our capacity to fund new capital developments in those cases where the PFI cannot offer a solution. However, as the schemes prove, the PFI can provide real and valuable alternatives and can offer excellent value for money. It also enables us to address urgent priorities now, rather than have important schemes wait until new public funds can be found.

Mr. Harry Barnes (North-East Derbyshire): Will my hon. Friend give way?

Mr. Jones: No, I will not give way. I have only another five minutes to complete my speech.

For the future, negotiations are now well advanced with private sector partners on proposals to provide new hospitals to serve Neath and Port Talbot, and in western Cardiff. Elsewhere in Wales, the national health service continues to explore the potential for the PFI to help deliver new buildings and high-quality services.

We have been able to make PFI work because we have been prepared to take head-on some of the logistical problems that bedevilled PFI in the past. One of our first actions was to appoint Sir Malcolm Bates to review the PFI process. He did an excellent job in analysing problems and, more importantly, finding solutions. Since Sir Malcolm reported, we have fully implemented all of his recommendations.

In addition, we have been able to make PFI work because we have recognised the importance of getting the interests of staff right when evaluating bids and contracts. Openness between bidders, trade unions and staff is an

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essential part of the PFI. PFI is not a secret process.That is why we have published guidelines on the consultation of staff and other interested bodies, as well as requiring the publication of key business cases and PFI documents.

Mr. Llew Smith: Answer the question, Jon.

Mr. Jones: Perhaps I am not answering the question in the way that my hon. Friend would like. If my hon. Friend is ideologically opposed to the whole concept of PFI, there is nothing that I, as a Minister, can say that will satisfy him. The Government have ensured that the maximum transparency and fairness is incorporated into the way in which the negotiations take place.

There is always room for improvement, and the Government recognise that. We will be taking action to make PFI deals easier to complete. We are now looking at how to streamline the process of putting a PFI deal together. There is little doubt that both time and money can be saved by having standard template contracts. We published draft guidance on standard model clauses this month. Next month, we will publish guidance on accounting treatment that will help determine the level of risk transfer that will deliver best value for money.

We have also asked Sir Malcolm Bates to take a second look at the PFI--and public-private partnerships more generally--to see how the Government can further refine our approach. That is because each project is different. That fact is a reflection of the different problems and priorities in different settings.

We want to improve public services, to get better value for money, to provide incentives for effective business management, to correct underinvestment, and to optimise capital investment flow. That diversity calls for the development of a new approach to enable the public and private sectors to work together. The Government will be taking a lead in that process in the months ahead.

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