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29 Jan 2003 : Column 964—continued

Mr. Rendel: Does the hon. Gentleman accept that the Government have been unable to provide any evidence to show that there is a margin between what a graduate earns and what an average person earns that is any different from what that person would earn even if they were not a graduate? The graduate premium is not based on any evidence. All we know is that those who happen to be graduates earn more than those who are not, but that is not necessarily to say that they would not have earned that much in any case.

Geraint Davies: The evidence that I have seen suggests that there is a causal relationship not just a correlation. Some higher-earning graduates pay about £140,000 extra tax in a lifetime, those in the middle pay an extra £30,000 to £40,000, while those at the bottom end may pay slightly less. It is a moot point. Obviously, if one takes certain degree courses, such as medicine, veterinary science or law, which provide added value through knowledge, as opposed to a mere screen for one's IQ, one will get a return from that.

That means that at a time when people are expected to pay for their degree at a later stage, there will be greater demand for degrees that have a perceivable return as opposed to, for example, humanities degrees. Someone might say, "I can get a humanities degree, but I won't

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have the added value of being a medic." It has been suggested that the extra top-up fee will be applied to more popular courses such as medicine. In that case, poor students, who currently have to pay £1,000 in tuition fees, will have to pay £3,000, minus the £1,000 grant. They will have to pay twice as much, albeit that the payment is deferred.

Poorer students may have to jump bigger hurdles if they choose courses that offer higher salaries later. I appreciate that that is a sophisticated point, but it is nevertheless important. Of course, the Government have offered to write off debts if students enter public service. That is good for public service, but market distortions and so on must be taken into account.

There are choices and challenges. I should have liked national insurance to be extended beyond its current level, up to where the 40 per cent. tax starts as a surrogate graduate tax. I attended a large comprehensive school and was the only one to get into Oxford university that year. No one had gone to Oxford in the previous year and no one went in the following year. If I had had to face extra costs of £7,000, I would not have gone.

The Government are clearly chasing an entry target of 50 per cent. for 2010. They want to provide better access. Whether they achieve the target is an empirical question, which the Public Accounts Committee will again consider.

Let us consider the report entitled "Postcomm: Opening the Post". As other hon. Members have said, our impact on the postal service in Britain was significant. Consignia was about to restructure and lose 30,000 jobs and the over-zealous regulator was prepared to enforce liberalisation in the marketplace ahead of our European counterparts. That would have meant that competitors from Germany, and especially Holland, could have come here, cherry-picked, taken the heart out of the postal service and undermined universal service provision.

People in Britain have rightly been used to a postal service that delivers mail anywhere in the country for the same stamp. It was suggested that there was a danger of cherry-picking. The regulator implied that there was no cherry-picking and that the direct costs were covered in rural parts of the country. That is fallacious. Clearly, if an operator takes 90 per cent. of all postal services and simply uses Royal Mail stamps for the other 10 per cent. so that Royal Mail picks up the fixed costs of the deeply rural areas, that constitutes unfair competition.

I am glad that our intense scrutiny and the regulator's lack of rigour, which was shown in our hearings, meant that the arrival of competition is delayed. The regulator claimed that whether the playing field was uneven and other such matters were not in his remit.

Mr. Steinberg: I am sure that my hon. Friend remembers that the regulator objected to the increase of 1p in the price of a stamp. The Post Office suggested that that increase, which it was not allowed to make for many years, would have solved many of its problems. Does my hon. Friend agree that the regulator therefore put the Post Office in a worse position?

Geraint Davies: That is an important point. We found that, in the past five years, although the Post Office's

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turnover had increased from £6 billion to £8 billion, it had moved into negative profitability. The reason for that was that the real cost of a first class stamp had gone down by 8 per cent., because the Post Office was not allowed to raise the price of stamps. Yet when the British public were asked "What do you think about value for money?" nine out of 10 would reply, "It's very good value." The cost of a stamp here was about 30 per cent. less than in Germany and elsewhere.

We were finding that, in essence, the regulator was working against the public interest. The withdrawal of benefit income is causing the widespread destruction of postal services in the rural community. The amount involved is £400 million, which is a penny on stamps, and I believe that the public would agree to pay the extra penny for those extra services. But the public are not given that choice, because of the way in which the Post Office is set up and is commercially run, without factoring in social value as well.

Mr. Steinberg: When I asked the regulator about an increase of a penny on a stamp, he said that it was his ambition to see the price of a stamp decreased. That being the case, I think that the regulator was working against the Post Office rather than for it.

Geraint Davies: It was my experience that the regulator was completely out of touch with the public interest and was acting in a very narrow way. He clearly did not like Consignia or the people in it, and wanted to move forward irrespective of the outcome to the Royal Mail. Luckily, the public mood and the sterling work of our Committee managed to stop that and delay liberalisation.

The final report that I wish to allude to very quickly is the 61st report, on the management of surplus property by the NHS. The NHS is to sell off £700 million worth of land and property by March this year. The difficulty in London is that an extra 800,000 people will move in, requiring health services, which cannot be provided if less land is available. Individual trusts have been selling off individual bits of land and property, without a strategic approach. I believe that in London there should be an audit of all public sector land—highways, health, police, rail, local authorities and so on—with the aim of taking a strategic view on land use over the next 10 years in terms of the public interest. The National Audit office could take a lead in this audit, which would be done not just for health needs, but for housing needs and the like. It would be better than a piecemeal approach, which ultimately would not deliver the best use of land for operational and accommodation needs.

We have been talking about the issue of PFI. Clearly, the arguments for PFI are about risk transfer, added value and innovation, as well as off-balance-sheet financing. But a key issue is the fact that the discount rate that the Treasury now applies has gone from 6 per cent. to 3 per cent. I support that, but it will make for a much more competitive environment in which new PFI ventures will seek to make money. Therefore, I think that fewer will come forward, and accordingly I support the Audit Commission's recommendation that

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we twin-track traditional public procurement ventures, in terms of building hospitals and the like, alongside the newer forms of financing, so that we have a proper test.

Mr. Love: As the National Audit Office and the Public Accounts Committee are supposed to scrutinise public expenditure with a view to value for money, and as the Audit Commission has questioned whether PFI in the education sector provides value for money, I wonder whether either the National Audit Office or the Public Accounts Committee has yet had an opportunity to discuss the Audit Commission's very important recommendations.

Geraint Davies: We have not, but the Audit Commission's report echoes the findings of the NAO, which are that some of the early PFIs provided less value for money, but that the more recent ones exhibit the effects of a learning curve, much of it informed by the work of the NAO and the Audit Commission itself, and are delivering much better value for money.

The point that I am trying to make is not that PFIs have been historically problematic, but that, given the upfront costs of competing PFIs, making them much more competitive, reducing the discount rate, providing clawbacks and so on, may discourage some private sector operators from coming forward, which is fine. We do, however, need to engage public sector comparators and procurement to ensure that there is real competition between both public and competing private sector providers. I am sure we will do that.

In essence, it has been another great year for the PAC. On prisons, the question of whether we can deliver better value for money for taxpayers out of the £34,000 investment should be considered, as should land use by the NHS. There is much thinking to do on higher education and a range of other issues, including PFI. As I said, we can do that because we have an alternative civil service of 700 or 800 accountants supporting us. The work of the PAC in providing financial scrutiny for the House of Commons continues its great tradition as the premier Select Committee of Parliament.


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