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Private Finance Initiative

6. David Taylor (North-West Leicestershire) (Lab/Co-op): How much public money has been (a) committed and (b) spent under the private finance initiative since 1997; and if he will make a statement. [62329]

The Financial Secretary to the Treasury (John Healey): Since 1997, the Government have signed over 650 PFI projects, with a total capital value of £43 billion. Since 1999, the Treasury has published forecast future unitary charge payments signed under PFI projects alongside the Budget.

David Taylor: The Chancellor and his team have indeed been remarkably successful since 1997 and I look forward to early promotion for every one of them, but can the Minister explain the continuing Treasury love affair with PFI? The Budget small print hid a large sum of £26 billion—2 per cent. of gross domestic product—being ladled into 30-year projects which, if conventionally financed and run, would be lower cost and have the greater flexibility that is needed in a rapidly changing world. Would it not be prudent in a market with historically low interest rates to abandon PFI and expand public borrowing for investment?

John Healey: As my hon. Friend really knows, one cannot sensibly make such calculations because the payments on the PFI projects include the cost of catering, maintenance, cleaning—the servicing of the asset. In typical PFI projects, those costs are 40 to 50 per cent. of the unitary charge payments. In those circumstances, the PFI has been an important but modest part of the fivefold increase in the public sector net investment that we have put in place since 1997. There are hospitals, schools and transport projects around the country that could not have been put in place without the contribution of the PFI.

Susan Kramer (Richmond Park) (LD): How many hospitals are cutting front-line staff because PFI contracts have taken away their flexibility to meet budget cuts by cutting or dealing with maintenance, cleaning or financing, as the Minister just described? Many of my constituents use the West Middlesex hospital and they are suffering because the only cuts possible are in front-line staff.

John Healey: The hon. Lady needs to understand that PFI is a form of procurement. Whatever the type of procurement, the needs locally must be assessed and established. The capacity to cover the cost of that investment, conventional or PFI, must be established. PFI contracts have mechanisms in place to vary the
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arrangements, should the needs locally change. In the context of the Budget, we published a document that I think the hon. Lady would welcome if she read it. It strengthens the mechanisms that allow us to put in place the contract variations that may be necessary in the future.

European Single Market

7. Mr. Ian Austin (Dudley, North) (Lab): If he will make a statement on progress towards the European single market. [62330]

The Chancellor of the Exchequer (Mr. Gordon Brown): Next week, the Treasury will publish a paper on the benefits of open markets for Europe and for a Europe that rejects protectionism. At the meeting of European Finance Ministers in Vienna, we will propose that all energy and other sectors that fail to liberalise and open up to competition in the European Union be subject to independent investigation and enforcement.

Mr. Austin: Does my right hon. Friend agree that the incomplete liberalisation of European energy markets has been a major factor in recent high gas prices? Will he put pressure on other European countries that have failed to open up their markets, so that we can get prices down for hard-working families facing higher bills after the last, coldest months of the year?

Mr. Brown: I am grateful to my hon. Friend, who has pointed out the direct effect of the lack of competition in European markets on consumer prices for people throughout the United Kingdom. The cost to us of not having a fully liberalised gas market is about £10 billion a year, which forces up consumer gas prices and means that pensioners and others face higher energy bills. That is why the European Union must now reject protectionism and move towards a far more open market for energy, for financial services, for telecommunications and for utilities, which is why we are now advocating a different course of action. Instead of just reaching political agreements about timetables for liberalisation, a process should be set up in Europe so that those sectors that fail to liberalise and open up to competition are subject to investigations on behalf of consumers and then to new enforcement mechanisms. That would end the practice of economic patriotism, which is against the interests of consumers right across the European Union.

Sir Nicholas Winterton (Macclesfield) (Con): I congratulate the United Kingdom on the way in which it has liberalised its market. We believe in fair and free competition, and the problem lies with a number of countries within the European Union, not least Italy and France. When will the system allow immediate action to be taken against those countries that are not liberalising and that are protecting their industries, particularly in energy, to our disadvantage?

Mr. Brown: I agree with the hon. Gentleman, who has spoken about those issues in the past. It is completely unacceptable that British industries should play by the rules while industries in other countries do not play by the rules of the single market. It is essential that we send out a
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message that beggar-my-neighbour policies, protectionist policies and the restriction of competition are damaging both to the consumer and to industrial growth right across the European Union. Indeed, if we fail to get a world trade agreement, such practices will damage industrial growth right across the world, which is why we are proposing a different course of action. In the past, we have had meetings to set timetables on liberalising the energy sectors by this date, the utilities sector by that date, the telecommunications sector by another date and the services sector by a further date. Instead of simply relying on people honouring promises that have been made at such meetings, a mechanism should be implemented so that the European Union itself, perhaps through an independent competition authority separate from the European Commission, investigates sector by sector what is going on and who is restricting competition. Such an authority should have enforcement powers to deal with restrictions on competition, so that we can open up trade across the single market and influence world trade talks, where the damage that will be done by a return to protectionist policies for both developed and developing countries is something that we cannot accept.

Keith Vaz (Leicester, East) (Lab): My right hon. Friend must be delighted by the results of the Lisbon scorecard published by the Centre for European Reform, which shows Britain as one of the best performing economies in Europe as far as those benchmarks are concerned. Is he confident, however, that the rest of our partners have learned the lessons set out in the Kok report?

Mr. Brown: Progress has been made in every country. Reforms are taking place in France, which is experiencing a reaction to them at the moment, and they have also taken place in Germany and Spain. It is true that, in particular, our employment record is one of the best in Europe on the Lisbon scorecard, and we will keep it that way. If I may say so, the reason why we have a good employment record is the combination of the policies that we have pursued for economic stability and the introduction of the new deal, which has helped people who are unemployed and who are without skills to get back into work. Even now, the Opposition should reconsider their opposition to the new deal and support a measure that has given more than 1 million people the chance of jobs in our country.


8. Miss Anne McIntosh (Vale of York) (Con): What recent representations he has received on his tax policy for biofuels. [62332]

The Financial Secretary to the Treasury (John Healey): The Government receive many representations as part of the Budget process and we consider them very seriously. The Budget included an announcement on the further extension of support in a range of ways for the development of the UK biofuels market.

Miss McIntosh: Although I am grateful for that answer, the Financial Secretary will be aware that there is disappointment that no firm commitment has been made to increase the renewable transport fuel obligation
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beyond 5 per cent. in 2010. Does he agree that that will be a barrier to investment that will prevent farmers from benefiting from the measure? What are the chances of the UK Government receiving Commission approval for the state aid of enhanced capital allowances, which, although it was announced in last year's pre-Budget report, has still not been given Commission clearance as state aid?

John Healey: There are at least two questions there. We are confident of the case for the enhanced capital allowance and hope to see it in place by 2007. I do not agree with the hon. Lady's initial comments. The renewable fuel transport obligation is there to give as great a long-term certainty as possible for those who must invest in future plant, particularly in Britain. I respect the arguments of bodies such as the National Farmers Union, but in the end the companies will make the investments to deliver the market and the production. The hon. Lady might like to talk to the hon. Member for South-West Norfolk (Mr. Fraser), who has the first British bioethanol plant in his constituency. Another company, Losonoco, which has big bioethanol plants, said of the Budget:

Dr. Alan Whitehead (Southampton, Test) (Lab): I congratulate my hon. Friend on the introduction of the mechanism for making the renewable transport fuel obligation escalator work, particularly the 15p per litre buy-ups measure and the continuation of the 20p discount on tax. Will he ensure that there is a mechanism to monitor the introduction of those processes to ensure that the necessary investment goes into the plant for producing bioethanol and biodiesel in the UK?

John Healey: I can give my hon. Friend that assurance. He takes as close an interest in these issues, and is a source of as many ideas on them, as anyone in this House. As part of the process of producing the regulations that will help to put the obligation in place, we will carefully consider the carbon emissions assurance scheme that will be required to ensure that we get the most benefit to the environment from the development of a British biofuels market.

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