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27 Mar 2003 : Column 439—continued
PFI (Health Sector)
5. Mr. Nick Gibb (Bognor Regis and Littlehampton): If he will make a statement on private finance initiative commitments in the health sector. [105154]
The Chief Secretary to the Treasury (Mr. Paul Boateng): PFI is helping to deliver the biggest hospital building programme in the history of the NHS. Of the 104 PFI hospital schemes announced since 1997, 25 are already operational and a further 23 are under construction.
Mr. Gibb : It is clear from the various Red Books that our commitments under PFI are increasing inexorably. In the 1999 Red Book, for example, PFI repayments during 2007 are listed as £3.7 billion, but in the latest Red Book that figure has increased to £5 billion. Have the Government set themselves a golden rule for a maximum figure for such payments, or are they acting like an out-of-control shopaholic, with increasing credit card debt and monthly payments that are spiralling out of control?
Mr. Boateng: What we are doing is investing in the NHS; what we are doing is actually building hospitals. We will take no lessons on PFI from Conservative Members, because the fact of the matter is that they did not deliver a single hospital under PFI. We have delivered 25, and there are 114 still being built. That is good news for the NHS, good news for patients and good news for clinicians. What we know would be bad news is the 20 per cent. cut that the "Flight plan" would involve.
Mr. Geoffrey Robinson (Coventry, North-West): My right hon. Friend is correct in not taking any advice from the Conservatives. During their years in office, the PFI was a total failure, and it has come to life under this Government. Is he aware that the PFI is making a vital additional contribution to the new hospital programme, and will he please ensure that the Coventry PFI project continues on course? I should be grateful for his confirmation on that.
Mr. Boateng: I shall certainly now take a particular interest in the Coventry PFI hospital, but I am bound to
say that the whole House owes my hon. Friend a debt of gratitude for his contribution to the successful development and implementation of PFI.
Adam Price (East Carmarthen and Dinefwr): The Government's own figures show that the volume of PFI commitment in health in Wales is lower than in any other part of the country, which is due in large part to the Welsh Assembly Government's opposition to PFI. Will the Treasury allow the National Assembly to explore alternative funding mechanisms, including the issuing of a National Assembly bond, or is a lower level of capital investment in Wales simply a price that we have to pay because of our rejecting PFI?
Mr. Boateng: Wales is receiving its fair share of the biggest increase in NHS investment that this country has ever known. The hon. Gentleman knows very well that we proceed on PFI on the basis of value for money, and on the contribution that it can make to the massive public investment that we are already making. That is reflected in Wales, as it is reflected elsewhere.
Insurance Industry
6. Mr. Nigel Beard (Bexleyheath and Crayford): If he will make a statement on the prospects for the insurance industry. [105155]
The Financial Secretary to the Treasury (Ruth Kelly): The UK insurance industry is the largest in Europe and the third largest in the world, with £119 billion in annual net premiums, paying out some £240 million a day in pension and life insurance benefits, and £45 million a day in general insurance claims. The best basis for the long-term prospects for saving and the industries that it supports remains a strong economic policy framework, delivering a platform of low inflation and sound public finances.
Mr. Beard : I thank my hon. Friend for that reply. Is she satisfied that the accounts of insurance companies fairly represent their liabilities? Moreover, is she concerned that certain regulatory arrangements designed to ensure that companies can meet their liabilities have a cascade effect on equity prices, whereby several companies selling at once generate a fall in equity prices, which itself triggers further concurrent sales from insurance companies?
Ruth Kelly: My hon. Friend makes an interesting point. He is right to point out that an over-mechanistic approach to interpreting insurance company accounts could lead to a downward spiral and affect equity prices. The Financial Services Authority is closely monitoring the solvency of life insurance companies and recently wrote to them to emphasise that their main responsibility was to protect policyholders. The FSA made it clear that a breach of the statutory regulatory
margin did not represent insolvency. The letter is widely perceived to have alleviated those sorts of market pressures.
Mr. John Bercow (Buckingham): What assessment has the hon. Lady made of the likely impact of the insurers' reorganisation and winding-up directive on purchases of reinsurance and on trade creditors?
Ruth Kelly: We are aware of the situation regarding the winding-up directive. The Treasury is actively consulting insurance companies on how that directive can be implemented so as to minimise any potential difficulty.
David Taylor (North-West Leicestershire): Last Friday, I spoke to owners of small care homes at the Caretalk conference at the county cricket club in Leicester. Those owners told me that the cost of their premiums for public liability and employers' liability was ballooning alarmingly. Is it not possible that the insurance industry, in a panic response to its problems, is escalating premiums beyond what is reasonable, and therefore driving some small businesses to the wall?
Ruth Kelly: I am aware that small businesses have been severely affected in some instances by recent sharp increases in the cost of liability insurance. That may have been the result partly of underpricing the premiums in the past, partly of an increase in the number of claims and litigation cases, and partly of the fallout from 11 September on the insurance industry. Because of those concerns, the Department for Work and Pensions is leading a review. It will establish a basis of evidence before proceeding further on all of these issues. The Office of Fair Trading is also considering the evidence to see whether there are competition issues in the market. It will report later this spring.
Dr. Vincent Cable (Twickenham): Is the Minister aware of the report of the accountant Colin Slater into the life insurer Equitable Life? The report suggests that, for the best part of 10 years, the company operated a pyramid selling scheme over declaring bonuses and concealing deficits. If Lord Penrose establishes that that is what happened, what action will the Minister take in respect of the negligence of the Department of Trade and Industry as regulator? Will policyholders be compensated?
Ruth Kelly: I am aware of the report that the hon. Gentleman mentions. It is clear that the problems at Equitable Life are deep seated and go back for many years. That is why we set up an independent inquiry under Lord Penrose. However, the hon. Gentleman will have to be patient and await the outcome of what is, after all, an independent inquiry.
World Trade
7. Jim Knight (South Dorset): What plans there are to discuss progress on world trade agreements at the April (a) IMF and (b) World Bank meetings. [105156]
The Chancellor of the Exchequer (Mr. Gordon Brown): I have invited the director general of the World Trade Organisation to address the International Monetary Fund committee on 12 April to discuss the current WTO negotiations on a new trade round and also how we can meet the September deadline for progress on trade.
Jim Knight : I am sure that my right hon. Friend agrees that it is vital for the poorer countries that good progress is made in world trade talks on issues such as fair trade, generic pharmaceuticals and agricultural reform. Will my right hon. Friend give us his assessment of what damage current international divisions may have done to the prospect of making progress on these important issues?
Mr. Brown: I am grateful to my hon. Friend for taking an interest in this. There are four areas where the WTO talks are behind schedule: the first is in agriculture, where we await the new European Union proposals; the second is in medicines, where it has been impossible to reach the agreement that was sought; the third is in services; and the fourth is in special treatment for developing countries. It will require an enormous push by all the major countries to reach agreements in Mexico in September.
My hon. Friend raised the particular issue of pharmaceuticals. It is all the more important that pharmaceutical companies and Governments come together to see whether we can reach an agreement under which the poorest countries can enjoy access to medicines that should be available to them at prices that they can afford.
Dr. Jenny Tonge (Richmond Park): With all his troubles at home, the Chancellor must be very pleased that there are so many questions on international development today; indeed, it makes one think that there may be a reshuffle in the offing. At these meetings, will he take into account the under-representation of developing countries on all these international bodies, and will he tell the House what he hopes to do to increase their capacity, so that they can have better representation to put their case?
Mr. Brown: We have just made a proposal on increased representation for the developing countries in the decision making of the International Monetary Fund and the World Bank. The hon. Lady will be interested to note that it is a British proposal, which is gaining considerable support.
I am sorry that the hon. Lady thinks that it is not important for me to answer these questions. The World Bank and the International Monetary Fund have their spring meetings on 12 April. The G7 is meeting the day before. The World Trade Organisation talks have been stalling for some time and we need to make progress on debt relief and on the international finance facility. I happen to be the UK representative attending those meetings, and usually the hon. Lady supports us when we raise issues of international development.
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