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4.45 pm
The central question is what the Government intend Partnerships UK to do. The industry does not know, Parliament does not know, I am not clear, and I question whether the Minister is entirely clear. She speaks of allowing it to develop and to have sufficient flexibility in the future. The danger of that approach is that it will develop major conflicts of interest and the same bad habits as the equity bank of the 1960s.
On amendment No. 16 to clause 16, it is of course correct and desirable that Partnerships UK's accounts should be open to inspection by the Comptroller and Auditor General, but what will be the accounting policies of Partnerships UK? What will be its depreciation policies?
The Government have an interest in PUK at one remove and as a minority shareholder. The accounting principles of Partnerships UK and who will determine them are a crucial matter still to be resolved. Few topics could be more relevant to the issues raised by the rest of the provisions. Unless the rest of the Bill is changed as proposed, no one will have a clue what the Government's interests are in Partnerships UK or how they will account for its activities.
I shall deal now with amendment No. 14. Reading through Government announcements at the time when Partnerships UK was launched, I attempted to distil its intended role as the Government perceived it. We have sought to limit the definition of Partnerships UK's role to those activities. As amendment No. 14 states,
The first potential conflict of interest arises from the fact that Partnerships UK exists in an idealistic sense to give good advice to public sector bodies, but it also aims to grab the business as profitably as possible for itself.
The second potential conflict of interest is that Partnerships UK will have privileged access to private finance initiative deals and a privileged position in its relationships with the Treasury and Government Departments, but it is majority owned by the private sector. It is therefore in competition with a considerable number of other bodies in the PFI industry. The Bill gives it a privileged position which will be impossible to manage. It would be improper for Partnerships UK to be permitted to participate as a long-term investor in PFI equity projects.
The rest of the amendments are relatively straightforward. Government amendments Nos. 29, 30 and 31 broadly cover the same territory as amendment No. 15. They try to make it clear that Partnerships UK can be involved in PFI business outside the United Kingdom. That involves less conflict than does such business in the United Kingdom, and it is clearly welcome if PUK can make money through business outside the country.
Mr. Bercow:
My hon. Friend hinted at a possible conflict between the Bill and European law. Given the unimaginable embarrassment that this Government of Europhiles would suffer if, in the context of the clause and the amendments, they faced legal action from the European Union, does he agree that it would be helpful if they published the legal advice that they received on the matter?
Mr. Flight:
I thank my hon. Friend for his pertinent remarks. I suspect that this Europhile Government may not even have thought of the problem, just as they had not sufficiently considered European Court of Justice issues in relation to the Financial Services and Markets Bill.
I apologise if I have spent too much time in taking hon. Members through the precise arguments for the amendments, but I hope that I have made it clear that a potential problem exists unless the activities of Partnerships UK are limited to the upstream activities that I defined.
The Bill is at its Report stage, yet clauses 16 and 17, which are tucked away, provide substantial powers for Partnerships UK without giving a clear definition of its activities. The Government have not resolved that. The Government have been warned by the industry, business and the trade union movement that, if the measure is left as wide as it currently stands, it will put Partnerships UK in a position in which it will face unacceptable conflicts of interest.
For those reasons, our amendments try to limit and define much more precisely the activities of Partnerships UK. If there was reasonable scope for those activities to broaden in future, they could be reconsidered in further legislation. The argument that we must have the widest possible measure now to enable Partnerships UK to develop does not stand up. I urge the Government to
reconsider what they want out of Partnerships UK. The other place, if not the House, will need to follow up our points and limit the role of Partnerships UK to that which is proper.
Mr. David Davis (Haltemprice and Howden):
I want to speak briefly about three amendments in the group. First, I want to comment on the limitation that the Minister mentioned at the beginning of our proceedings. Secondly, I want to consider amendment No. 16, which is in my name and the names of the right hon. Member for Swansea, West (Mr. Williams) and the hon. Member for Newbury (Mr. Rendel). I also want to probe the Minister slightly on the philosophy that underpins the accounting for Partnerships UK.
I welcome the Government's decision to accept our suggestion in Standing Committee on limitation. That is sensible. I also thank the Minister for consulting the National Audit Office on that; it was clearly worth while. I want to ask a question that may turn out to be about a technical point, but I hope that the Minister will clarify it when she winds up. Does the limitation refer to proposed new paragraphs (b) and (c) of clause 16(1), but not to subsection (1)(a), which states:
The second issue is raised by amendment No. 16, in my name and the names of two of my colleagues on the Public Accounts Committee, the right hon. Member for Swansea, West and the hon. Member for Newbury. It says:
Mr. Oliver Letwin (West Dorset):
Does my right hon. Friend agree that this is an interesting test case of whether the Government intend to constrict the applicability of the National Audit Office and the Comptroller and Auditor General, since, after all, the body in question is one that they are setting up de novo, and they have claimed
Mr. Davis:
I do not agree with my hon. Friend. As will be clear in a second, it is a test case of something else, of whether or not we can have in statute, rather than by Executive promise, the rights that apply.
The Chief Secretary, giving evidence to the Committee of Public Accounts last month, acknowledged the important role of the Committee in scrutinising the apportionment and transfer of risk under public-private partnerships and private finance initiatives. He gave a commitment that the Committee would have full scrutiny of and oversight over public money paid to Partnerships UK, as well as of money going into projects for which Partnerships UK will be responsible. That commitment is welcome; it was unanimously welcomed in the Committee. The amendment would simply secure in statute the mechanism for providing the Committee with the oversight role, by giving the Comptroller and Auditor General the necessary access powers to obtain information to inform the Committee.
Mr. Letwin:
I accept my right hon. Friend's correction. It is encouraging to many of us to hear of that commitment. However, does he agree that if the Government are reluctant to accept the PAC's amendment it would suggest that that commitment may be temporary?
"upstream public-private partnerships activities" means acting as a manager in the organisation of public-private partnership projects, providing public sector organisations with expert advisory and implementation skills, providing interim finance for feasibility studies for local government public-private partnership projects and negotiating the necessary arrangements for particular public-private partnerships with the relevant government departments and the Treasury.
Those are the activities that the Government claimed when they spun the story of the setting up of Partnerships UK. The definition offered by the amendment is
considerably more explicit and narrower than that provided by the Bill, which is broad and unclear and which opens the door to all sorts of conflicts of interest.
The Treasury may incur expenditure in respect of the establishment of a body for the purpose of carrying on public-private partnership business?
That opens up the option of creating a dowry. I do not think that that was the intention; I suspect that it is just the way in which the wording is made rather general. But I should like to hear that that is the Government's view. There may be a need for amendment by the Government in the other place.
The accounts of a body to which financial assistance is provided under subsection (1)(b) or (3) shall be open to inspection of the Comptroller and Auditor General and that body shall give such explanations of those accounts as he may reasonably require.
The amendment is designed to remedy an omission from the Bill. It provides for the Comptroller and Auditor General's access to Partnerships UK. The Government intend to establish the body as a limited company to exercise a key role in developing the private finance initiative. Partnerships UK will take decisions having a wide impact on the use of public money. The Treasury will be able to use public money to fund it. It will take on functions that are currently performed by a taskforce within the Treasury, whose work is currently open to scrutiny by the Committee of Public Accounts through the Comptroller and Auditor General's current statutory access rights.
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