Examination of Witnesses (Questions 120-130)
HM TREASURY &
PARTNERSHIPS UK
20 JUNE 2007
Q120 Mr Bacon: That comes to £157.9
billion. Is that then a rough proxy for the answer to my first
question, Mr Stewart?
Mr Stewart: I think that is the
liabilities accruing under PFI.
Q121 Mr Bacon: That is what I am
interested in.
Mr Stewart: That is not equivalent
to the debt.
Q122 Mr Bacon: Right, so the debt
is something different?
Mr Stewart: The debt relates to
the capital element so the unitary charges include payments for
soft services.
Q123 Mr Bacon: You brilliantly bring
me on to my next question because presumably therefore, to take
an example on your website, the MoD building is £439 million
capital value in there. Last time I looked last year it said £300
million and something, so quite how it has gone up I do not know,
but, anyway, the National Audit Office Report said £746 million
was the value of the contract and the difference which is quite
significance is accounted for --- sorry I am getting mixed up,
it is not £458 million it is £370 million, the difference
between the £439 million on your website which says capital
value and the £746 million referred to in the National Audit
Office Report where it says the price of the 30-year deal is £746.1
million, that difference of £448 million is accounted for
by what, just the soft services—I am sorry it is £307
million, the difference of £307 million is accounted for
by what?
Mr Stewart: You have the advantage
of figures which I am not familiar with. I am afraid I do not
know all the figures in our database. I can give you a note on
that if you would like.
Q124 Mr Bacon: It puzzles me that
here we have the National Audit Office itself saying that the
value of this deal—and, Sir John, you will remember the
MoD building very well, you did a big Report on it—and it
was £746 million, the number stuck in my head very clearly,
and yet your website says that the value of this deal at least
the capital value (you wrote down the words capital value) is
£439 million.
Mr Stewart: I suspect the difference
between the two figures is the lower figure is the capital and
the higher figure is the unitary charge, but I do not know, I
am guessing.
Q125 Mr Bacon: £746 million
is that upon which the unitary charge is based, presumably, is
it not?
Mr Stewart: I am sorry, I am just
not familiar with this project.
Q126 Mr Bacon: I am running out of
time but I would just like to ask one other question, if I may
very briefly, and that relates to the Libra project. On your website
it says £38.9 million, that is the capital value of that
project. We knew when the National Audit Office published its
Report on 29 January 2003 that the Government had spent £390
million on it. Last June Alex Allan told us that it has now gone
up by another £98 million so it is now £487 million.
The difference between £487 million and what you have got
on there of £38.9, that is my £448 million. Where did
that £448 million go?
Mr Stewart: Again I am afraid
I am not familiar with that project. What I would just point out
is that our database was something that we created three to four
years ago. We rely on information received by departments and
local authorities. We rely on them providing that voluntarily.
We are not required to forensically examine that information.
We provide it as the best information we can produce and it is
helpful to both public sector and private sector alike. We do
not give a 100% guarantee that the data is all correct. It has
a different nature to the data that is supplied for the Red Book.
It is designed to be helpful to the market rather than, as I said,
we do not go to the nth degree to get it 100% accurate.
Mr Kingman: I do not want to interrupt
but I think I may be able to answer your question on the MoD building,
if that would be useful. We covered this in the letter that I
sent to the Chairman following the last hearing and there were
two figures, one was £746 million and one was £345 million.
Both those figures are correct. The £345 million is the capital
value and the £746 million is the net present value of the
unitary charge payments.
Q127 Mr Bacon: Yes, but the unitary
charge payments over the life of the project reflect the cost
of servicing the PFI in total, do they not, including the cost
of constructing the thing.
Mr Stewart: And providing services
so that the building is available over the lifetime of the contract
with whatever services are in the contract, so it is not right
to equate that simply with borrowing.
Q128 Mr Bacon: Of course the cost,
as we know, is more like £2.3 billion the MoD will actually
pay. It was £2.5 billion, it seems to have come down to £2.3
billion now, so it is interesting the capital value is so much
lower. Is it possible, Mr Kingman, you will know roughly what
my question is from the transcript about this total debt therefrom.
I would rather rely on the Treasury website than the Partnerships
UK one, if you can send us a note giving us a more accurate rendition
of my rather quickly calculated number and then explain --- what
was the date to?
Mr Pocklington: 2031-32.
Q129 Mr Bacon: Is it possible you
could first do it up to 2031 as far as it goes and then explain
in total how much there is beyond that accounted for by whatever
contracts there are that for some reason or other run longer than
that?
Mr Kingman: We will certainly
do our best. I am not sure there is anything very useful we will
be able to say about the period beyond 2031-32.
Mr Bacon: I am looking for a number that
probably is in the region of £150 billion to £160 billion,
by the sound of it, but I would like a more accurate one and some
assessment from you of where you think it might be going after
on that, so if you add the two together you would get a total
public sector liability.
Q130 Chairman: Under your own rules
you will agree to do that within two weeks. I think that concludes
our hearing. These are poor Reports and given that we are in front
of supposedly the brightest minds in the Civil Service we have
not found your performance very reassuring. We last looked at
this four years ago and found that PFI deals were slow and cumbersome
and as such posed a threat to taxpayers' money. Since then we
are seeing departments persistently underestimating the cost of
launching PFI deals, adviser costs alone have soared to 75% more
than expected, a third of all deals went through major changes
with only one bidder left at the table. We think there has been
a lot of foot-dragging on the part of departments and, as we have
found out today and seen in this Report, PFI deals are lasting
about three years, wasting, as I say, tens of millions of pounds.
So we will issue another Report and, Mr Kingman, when we return
to this again in four years' time we hope to see a lot more progress
because PFI was supposed to be the glad, confident morning of
contracting services in the public sector. It may be a good idea,
and we are not competent to make policy on this issue, but it
seems there have been enormous wasted opportunities and we the
taxpayer are paying the price. You may make a final comment if
you wish.
Mr Kingman: I would only add,
Chairman, that we too hope and indeed expect, as and when we appear
in front of you next time, to be able to show that there has been
more progress.
Chairman: Thank you very much.
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