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29 Jan 2003 : Column 954—continued

Mr. Jenkins: The same gentleman—the spokesman for the construction contractors—said that on early PFI contracts, the firms lost on almost every building project. The cost to the companies of building was greater than the money they received. They relied for profit on the rest of the package—the continuing maintenance and operation of the projects. Why did everyone lose on construction but remain eager to take part in the process? That is the worrying question.

Jon Trickett: I thank my hon. Friend for those points. I do not feel that, either in the reports before the House or subsequently, we have come to grips with the operational details of the process.

As I was saying, the possibility of collusion cannot be ignored. Furthermore, the way in which the civil service has operated the tendering process means that often the shortlist of competitors has been reduced to one far too early in the process. Once there is only one person in the ring and that person knows that they are the only one tendering, the capacity of competition to drive down the price to the advantage of the taxpayer is lost. That problem is seen all too frequently in the PAC's reports. The possibility of collusion combined with the practice of reducing shortlists too early in the process make me wonder about the degree of competition.

I make that suggestion because something quite startling emerged from our discussions with the chair of the Major Contractors Group. We were told that the cost of tendering could range from £1 million to £4 million. He told us about a £70-million contract that his company had won, in which the price of entry had been £4 million. The cost of tendering and preparing all the documents that the civil service wanted, was £4 million—in legal fees, quantity surveyors' and

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architects' fees and all the other functions that were required. The number of companies that are capable of stumping up £4 million—or even £1 million, which we heard was often the figure—is limited. Whether or not there is collusion, there must be a strong temptation among the handful of companies that are tendering for such work to say to each other, "Look, we are all spending £4 million, but only one of us will get the contract." I would be tempted, were I in that position—I have been in the building industry—to say that I would make a tight bid on the contract, but not on the next three; £4 million is a lot to risk on a gamble that one's bid might come in the lowest. To be fair to the contractors, such a suggestion was denied, but there must be a temptation. The price of entry to PFI prohibits the small and medium-sized contractors, militating against competition.

In every case, the PFI is supposedly tested against this thing called a public sector comparator. The idea is that the accounting officer will invite tenders from the private sector; as I have suggested, those tenders might have only limited value. The accounting officer will then compare those tenders with a mythical public sector tender, called the public sector comparator. How this is derived is a mystery to the Committee; we have never had it explained or analysed. Even this afternoon, the Treasury has fallen back on the public sector comparator, saying that where it is higher, it leads inevitably to a project being handed to the private sector and becoming a PFI project.

Mr. Bacon: It was a mystery to me, too. Does the hon. Gentleman recall Sir Kevin Tebbit referring to the "Monte Carlo method", which may illustrate the precision with which the public sector comparator is wrought?

Jon Trickett: I bow to the hon. Gentleman's memory. I do not remember that analogy, but I remember phrases such as "mumbo-jumbo" being used by accountants describing the public sector comparator. Accounting officers and permanent secretaries have to rely on something when they hand out £1 billion contracts. I believe that they are exposed to criticism if they do not have a comparative figure because, almost inevitably, we are dealing with a single private sector competitor in the latter stages of the bid. In order to demonstrate value for money, the civil servants have to be able to demonstrate in some way that they are choosing to go down one particular road rather than another. However, the public sector comparator model is riddled with holes and the National Audit Office has told us that it is mumbo-jumbo.

The Committee has agreed to look into the public sector comparator, but suppose the model collapsed, as I suspect it will? We would then be left with the dangerous position in which civil servants were handing out multi-million and sometimes multi-billion pound contracts to the private sector with no demonstration that value for money was being achieved.

If we put that alongside the point that the number of companies in the UK or Europe that are capable of bidding is down to a handful who meet frequently in conclave, we must be concerned about our exposure to

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the allegation that we are not getting value for money; in the mean time, we are putting future taxpayers in hock to the tune of tens of billions of pounds.

I have made these points on the PFI out of a genuine spirit of concern. I am in any event predisposed to believe that wherever possible the public sector ought to be the provider.

5.25 pm

Mr. George Osborne (Tatton): I apologise for not being present for the whole debate. I missed some contributions because my constituent, Sally Clark, has just had her conviction for murdering her two children overturned.

My work on the Public Accounts Committee is among the most rewarding that I have done in the 18 months that I have been a Member. The right hon. Member for Swansea, West (Mr. Williams) said that he joined the PAC in 1965, which was six years before I was born. That puts my 18 months of experience into perspective. Nevertheless, I have tremendously enjoyed the work. I remember that, when I was a Government special adviser, what the permanent secretary most feared was not his Minister appearing in Parliament or Opposition days, even when we had a majority of only one, but his appearances before the PAC. That struck a chord with me at the time, and I remember saying that, if I ever got into Parliament, I would try and get on the PAC, which I managed to do.

One of the strengths of the PAC is the fact that it does not get involved in the policy debates that dominate this place. That point has been made by a number of hon. Members in all parts of the House. We follow the money, as Woodward and Bernstein would put it. As a result, we uncover cases of fraud and weaknesses in policy. Another strength of the Committee is its Chairman. I must say that, or I will not be called in subsequent hearings. His relaxed style, with the touch of the rapier, is engaging and effective.

I join other members of the Committee in paying tribute to the work of the National Audit Office, which provides us such a tremendous service. I remember Sir John Bourn telling me that many of the people who work in the NAO could find much better-paid work in private sector accountancy, but choose not to because they are motivated by a sense of public duty and public spirit, and enjoy their work. Among the most enjoyable work are the studies conducted on behalf of the NAO that the PAC considers

I welcome the Financial Secretary as an honorary or de jure member of the PAC. I have mentioned to her before that the Tatton Conservative association provides mutual aid to the Bolton West Conservative association. The PAC is supposed to assess value for money and progress against targets. We have totally failed on value for money, because the Financial Secretary's majority seems to increase the more money we put into Bolton West Conservative association, and we have failed in our target to unseat her. I think that we will be twinned with a more marginal seat, so we are off her back. She will probably be there for some time to come.

The debate is wide-ranging because of all the reports. Hon. Members have picked on those that interested them. The Chairman did a good job of drawing out

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some general themes. I shall speak mainly about the private finance initiative, as have other hon. Members, and briefly mention a couple of other reports. I was struck by our work on NHS waiting lists and how targets distorted clinical activity. The right hon. Member for Swansea, West told me that when he was a Minister in the Department of Economic Affairs—which, by the way, is why I think he has a deep suspicion of the Treasury—Tony Crosland told him that Governments spend five years undoing what they do in the first six months. The NHS waiting list targets were an example of that. The work of the PAC showed how distorting targets can be, as they were on air quality, as my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) mentioned, I think, when I was absent.

The work that we did on prisoner reoffending was striking. I know that the hon. Member for Croydon, Central (Geraint Davies) was particularly interested in that. I was struck by the extremely high rate of recidivism and the lack of proper support for prisoners in prison through training and drug rehabilitation. I have in my constituency the second largest women's prison in the country, and it has no proper drug rehabilitation programme, despite the fact that 80 per cent. of the inmates are heroin addicts. That is very striking. It is also striking that 40 per cent. of prisoners are homeless when they are released, so it is hardly surprising when they almost immediately—

Mr. Lindsay Hoyle (Chorley): On a point of order, Mr. Deputy Speaker. I am very concerned that the right hon. Member for Haltemprice and Howden (David Davis) has been making arrangements to visit my constituency and have his photograph taken outside a brand new bus interchange developed by the Labour authority there, but has not had the courtesy to tell me that he is visiting the constituency. Can you give any ruling on this matter?

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