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Mr. David Davis: Some of the issues that the hon. Gentleman has raised were addressed in the Public Accounts Committee's report on the PFI. However, rather than focusing on the trade-offs that he has described, the report made it clear that design of PFI projects is critical to their success. The report also made it clear that, in the public sector, understanding of the separation of risk is very primitive indeed. Under the previous Government, the pricing mechanism used in road projects, for example, served to increase risk, making projects more expensive than they needed to be. There is, therefore, much to be gained in addressing the issue of project design. Moreover, in relation to project design, Partnerships UK is a good development. However, the report also
reinforces the point that value for money studies not only demonstrate the good and bad aspects of a project, but provide lessons to be learned for the future.
Mr. Davey: I certainly agree with the right hon. Gentleman on value for money studies, which would be promoted by his amendment No. 16, and which we must ensure are continued in all PFI projects. I do not think that he and I disagree on that. Liberal Democrat Members believe, for many of the reasons that he has outlined, that the PFI could be very useful in many spheres. His comments on project design also reinforce my previous comments. Although some projects can be designed so that the private sector is readily able to assist in improving efficiency, it is very difficult to see how other projects--I gave an example of one earlier--can be designed to ensure that we receive best value for money. I therefore hope that the Minister will say a little more--as she was pressed to do earlier by the hon. Member for Arundel and South Downs--on the activities of Partnerships UK.
Amendment No. 16 was tabled by the right hon. Member for Haltemprice and Howden and other members of the Public Accounts Committee, and is not, as the hon. Member for Arundel and South Downs said, a Liberal Democrat amendment. However, Liberal Democrat Members are certainly happy to support it and, in many ways, wish that we had got there first.
Mr. Letwin:
Does the hon. Gentleman agree that, in the light of the interesting information that we have received from my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis), the Chairman of the Public Accounts Committee, that there has been a Damascene conversion in the Treasury and the Chief Secretary has made a commitment to allow the Comptroller and Auditor General in, it is extraordinary that the Government should apparently resist an amendment that merely locks in that commitment?
Mr. Davey:
During the evening we may find that the hon. Gentleman anticipates what I was about to say on a number of occasions. The Chief Secretary has made that commitment. It follows that Ministers should accept amendment No. 16.
Mr. Letwin:
I promise that I shall not pre-empt the hon. Gentleman this time, because I want to ask him
Mr. Davey:
I was not about to go on to that, but I shall answer the hon. Gentleman. Perhaps the reason is that the Government are concerned about setting a precedent, because Parliament would then be entitled to say that many other corporations and trading companies with public sector involvement should be overseen by the National Audit Office. I suspect that that lies behind the Government's possible opposition to amendment No. 16, but we shall see.
Another reason why the Government should deliver on the Chief Secretary's commitment is that such public bodies, created by statute by the House of Commons, ought to be audited by the National Audit Office. Partnerships UK would not exist if statute did not create it. It is not a private company. That creates a prima facie case for National Audit Office involvement.
We know from new clause 7 that public money will be involved. Moreover, Partnerships UK will be a key tool of public policy. The Government want to develop the private finance initiative and public-private partnerships. There is no disagreement about that basic aim. Elsewhere in the Bill, the Government say that a body should be under the jurisdiction of the National Audit Office only if its role could be carried out by a Government Department. A Department clearly is undertaking the role of Partnerships UK. The Treasury set up a taskforce, which started work soon after the Government came to office. Yet again, by the Government's criteria, Partnerships UK ought to be under the institutional jurisdiction of the Comptroller and Auditor General.
Mr. Flight:
The hon. Gentleman has just raised the nub of the matter: is Partnerships UK going to take on the Treasury taskforce's role, as has been advertised, or is it going to do something entirely different? The Bill empowers it to do something totally different that may even be harmful to the present role that the Treasury taskforce has carried out well.
Mr. Davey:
The hon. Gentleman makes a fair point. I may be naive in accepting that the Government were going to do what they had said elsewhere that they intended to do. It is the Government's stated intention that the responsibilities of the Treasury taskforce will be taken on by Partnerships UK, but the hon. Gentleman is right to say that, given the drafting of the Bill, Partnerships UK could go much wider. The point made in amendment No. 16 is that the body should come within the scope of the National Audit Office.
The Liberal Democrats want the Government to deliver fully on their commitment. We want them to ensure that all public money that goes to Partnerships UK is properly audited. We want to make sure that the commitment given by the Chief Secretary to the Treasury is delivered and we believe that the best way to do that is for amendment No.16 to be agreed to.
Finally, let me say a word in favour of public sector managers. When we debate private finance initiatives and Partnerships UK, we are often left with the feeling that right hon. and hon. Members believe that civil servants cannot procure capital goods or get good value for
taxpayers' money. In reality, over many decades they have performed those functions very well. Indeed, in many areas they are still charged with the responsibility for capital procurement for the public sector. Whether or not Partnerships UK develops and takes on more of that work, many public sector managers will retain that responsibility.
I hope that, in establishing Partnerships UK, the Government will ensure that public sector managers are able to learn from Partnerships UK, and that they are not simply able to get advice from Partnerships UK, but are brought in for their skills and expertise as they will still be in charge of much of the capital spending in the public sector.
Mr. David Davis:
I applaud the hon. Gentleman's comment about public sector managers and draw attention to one factor that we in Britain take entirely for granted--the fact that more than 99 per cent. of our public sector managers are totally honest. We cannot take that for granted in respect of everything that happens on behalf of the Government. When something goes wrong, it is often at the interface between the public and private sectors. We are increasing precisely that possibility by going down the PFI route--not wrongly--and we have to be aware of it.
Mr. Davey:
The right hon. Gentleman is absolutely right. The Government should accept his amendment so that the public-private partnership can be developed with the probity that we have come to expect from our civil servants.
Sir Michael Spicer (West Worcestershire):
What worries me about new clause 7, and particularly the way in which the Minister spoke to it, is that the £400 million cap is the wrong cap. It is focused on what might broadly be called the operating costs of the monopoly organisation that has been set up to administer the public sector element of the PFI scheme. However, it does not restrict or contain the public moneys that are going into the PFI and that really should worry right hon. and hon. Members in the context of the Bill and the proposed new clause.
The Minister gave the impression that the new clause provided a real cap on heavy spending by the public sector on the PFI. That is quite manifestly not the case. As the provision is spurious and there is no such cap, there are all sorts of unfortunate consequences, some of which have been referred to by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis).
For instance, more and more of a fudge is emerging between capital and current spending. The expansion of PFI in a totally unconstrained way is resulting in the breaking of the Government's own golden rules. Borrowing is being conducted through spurious capital expenditure, unconstrained through the PFI, which actually turns out to be current expenditure. That puts a horse and cart through the Government's self-proclaimed golden rules. More generally, this kind of mishmash of Government and private spending in an uncontrolled way will be combined with the phoney privatisation schemes that are beginning to emerge--the Post Office being one example. We shall have to wait for the result of the mayoral contest to find out whether the underground will be another. Less and less control is being exerted and certainly, as my right hon. Friend said, totally unaccountable control is being exerted over public spending, particularly capital expenditure.
That is increasingly worrying. The Select Committee on the Treasury interviewed the Governor of the Bank of England this morning. There was discussion about the fact that, contrary to the public perception and the Government's propaganda, there is reason to believe that public spending is beginning to get out of control.
A report published yesterday by the Lombard Street research group showed clearly that the growth of public spending is taking off, and that it is matched by falling growth in tax receipts. Everyone thought that the deficit gap had been solved, thanks to the sound finances handed over by the previous Administration. It had been, for a while, especially when the Government took over the previous Administration's tight expenditure plans.
However, there is now the real possibility of laxity in this country's fiscal management. That would have all sorts of consequences, as the Select Committee discussed this morning. One of the reasons why our interest rates are on their way up is that there is an anticipation that public spending is getting out of control, as a result of the ways that the Government have found to get around their own rules and public expenditure constraints. There is a clear need for capping and constraining public expenditure.
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