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Hon. Members will know that I serve on the Public Accounts Committee. I am glad that it was made clear in August that the National Audit Office will be looking objectively at the different options before us and forming its verdict. I hope that everyone will take that particularly seriously. I welcome the appointment of Bob Kiley by the London Mayor. It is important to import new excellence to our public services, and I look forward to hearing his comments.
It is worth noting that the hon. Member for North Essex (Mr. Jenkin) pointed out that some of the major problems of the PPP resulted from the multiplicity of responsibility due to the break-up of the system, which leads to confusion and could therefore undermine safety. That completely contradicts the Tories' strategy for privatisation, which in itself gives rise to a multiplicity of functions and to confusion. The hon. Gentleman's comments are tantamount to an admission of guilt for the failures of privatisation and an explanation of why it has gone so badly wrong.
Mr. Davies: I think that it is important that the Government share information with Mr. Kiley and work closely with him to get the best transport system for London. There might be marginal issues relating to timing the release of confidential commercial information during a competitive tender process, but Mr. Kiley and the National Audit Office need at their disposal a complete account of the options available for the London system.
Mr. Brake: The hon. Gentleman, rightly, criticises the Conservatives for highlighting the problems of fragmentation caused by the PPP, and points out that that is exactly what happened under railway privatisation. Does that mean that he accepts that there is a problem of fragmentation associated with PPP?
Mr. Davies: No, that was not my point: I focused on the contradiction in the Conservative argument. However, I accept that if an organisation comprises too many pieces, there will be problems of co-ordination, which might lead to confusion, higher costs and, in extreme cases, problems with safety.
Mr. Brake: I am pleased to be able to assure the hon. Gentleman that I clarified with Mr. Hutton whether he thought it appropriate for me to relate his views on the subject. I also confirmed whether he was quite happy with my interpretation--he was.
It was also interesting to hear the rendition of Mr. Hutton's views given by the hon. Member for North Essex. He claimed that in the Industrial Society report, Will Hutton said that the problems of the PPP were, first, its uncertainty--well, we all know that the future is uncertain, and we understand the complexity of the options, so that is only stating the obvious--and secondly, that the extra cost of capital could, by some arithmetic, be translated into a 30 per cent. hike in fares.
In fact, London's tube system is one of the few in the world that makes positive gross margins--about £300 million a year--but it does not generate enough to pay back the cost of capital. Therefore, one can look at the figures and say that, at the margin, the cost of capital is greater under PPP than with bonds, for example, and then translate that into fares--but the issue to be considered when comparing the options is not the cost of capital, but overall value for money in terms of risk transfer, cost of delays and so on. It is easy to make quick comments, but careful consideration is required.
I consider it unfortunate that the hon. Member for Carshalton and Wallington gratuitously linked our serious debate on the different financial options for investment in the tube with the recent Austrian disaster. There is enough scaremongering going on. Many speakers have said that the tube is safe, even though it needs more investment. The tube is a good system and we need to renew it; the question is, how do we do that for Londoners?
Mr. Flight: I thank the hon. Gentleman for giving way. It was on an earlier point that I wanted to ask him a question. Does not money raised by bond issue have to be repaid? The history of bond issues to finance similar investments in the United States, or other public sector undertakings, shows that when one lot of bonds matures,
Mr. Davies: The hon. Gentleman knows that that is not always the case. In some bond issues, additional money has had to be obtained from taxpayers, because of the value of the bonds. Bonds entail an element of uncertainty and risk, which would be set against the London taxpayer--but the Mayor is currently not empowered to raise tax to cover that risk. That is one of the problems. I am glad that the hon. Gentleman made that point, so that I could demonstrate that it was wrong.
Mr. Bercow: I am grateful to the hon. Gentleman. He should not speak too soon, because he knows not upon what subject the intervention comes. In the light of his remarks about the need to minimise fragmentation--[Interruption.] Perhaps the hon. Gentleman will cease chuntering. In the light of what he said about the need to minimise fragmentation, what is his assessment of Pricewaterhouse's conclusion on the structure, upon which the Environment, Transport and Regional Affairs Committee deliberated in July 1998?
Mr. Davies: What a fine point! That was worth waiting for. The Pricewaterhouse analysis indeed shows a certain amount of fragmentation of the various components, the purpose of which was to generate competition and value for money. If the hon. Gentleman were not relying on a one-liner from the Library, he would know that the matter was more complex than that rather silly intervention--[Interruption.] That was characteristic of the guffawing to which I have become accustomed from that small character on the Opposition Benches.
I shall move to a point more serious than such one-liners, which we have come to expect instead of reasoned dialogue. I invite the hon. Gentleman to make a proper speech, rather than resort to the one-liners that he looks up late at night, a sad man in the Library.
Moving on from that momentary, derisory distraction, the issue between PPP and bonds is not simply ideological. It is an empirical question of which is the best value for money. There will obviously be a debate about who is best equipped to analyse that. The Mayor--the hon. Member for Brent, East--mentioned a number of experts who have come forward. There are other experts with different views, and we await the verdict of the National Audit Office and the Public Accounts Committee.