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House of Lords

Thursday, 4th May 1995.

The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Exeter): The LORD CHANCELLOR on the Woolsack.

Universities and Private Sector Finance

Lord Goold asked Her Majesty's Government:

    To what extent they consider the private finance initiative will contribute towards meeting the future needs of British universities for capital investment.

Lord Lucas: My Lords, many universities have already attracted private sector finance for their major capital projects. We believe that private finance options should be fully considered for all capital projects undertaken by bodies in receipt of public funds, including higher education institutions. On that basis, we expect that private finance will make a substantial contribution to the capital investment needs of universities and colleges.

Lord Goold: My Lords, I thank the Minister for his reply. However, declaring an interest as the Chairman of Court of the University of Strathclyde, I ask whether he accepts that the cost of repaying capital and interest on borrowing for necessary building projects, which often cannot provide an income stream, will inevitably mean fewer recurrent funds being available for teaching and research. Will that not lead to a deterioration in the quality of university education?

Lord Lucas: My Lords, I do not accept that a university such as the one in which my noble friend plays a part is involved in a deteriorating quality of education. If anything, rather the opposite is true. But, to a certain extent, capital and income are interchangeable, as I am sure the accountants among us will agree. One can spend capital in order to avoid spending income and spend income instead of capital. The extent to which any university needs buildings will depend on what it wishes to do with them. The whole thing is a package. The private finance initiative is intended to take the best advantage of the best structure to find the money to educate our young people.

Lord Barnett: My Lords, I am grateful to the Minister for giving us a lesson in how to interchange capital and interest. I have done a little of it—not creatively, I hasten to add! Is not the noble Lord, Lord Goold, right? I am not opposed to the private finance initiative. However, are the Government saying that if money is required for both capital and interest, they will provide additional resources?

Lord Lucas: No, my Lords. What we are saying is that we will not tell universities, except within certain limits, how they should spend their money. They may use it as income or they may use it to finance borrowings to make capital investments.

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Lord Morris of Castle Morris: My Lords, does the Minister agree that the private finance initiative may be appropriate for buildings like student residences where rents can be used to repay the capital, but that buildings devoted to pure research, to most contract-based research and certainly to all teaching purposes will simply not generate an income stream sufficient to repay the borrowing? Should not the HEFCs issue guidance to universities on how to avoid the seductive allurements of short-term solutions?

Lord Lucas: My Lords, universities are grown up people. They understand these matters. Yes, the HEFCs have limitations on the amount of income which universities can use for debt servicing. Otherwise, we leave it very much to universities. I should point out to the noble Lord that most of a university's income depends on getting students. That applies to accommodation income as much as to anything else. So there is risk in the provision of accommodation, just as there is in the provision of teaching facilities. Some of the most successful private finance initiatives by universities have come through the provision of laboratories for research jointly funded by industry which uses the product of that research.

Lord Gisborough: My Lords, will my noble friend say whether the finance initiative is flexible enough to meet demands for modest amounts such as £5 million or £10 million? Is he aware that some universities are worried that while it may be possible to arrange for larger loans, they will not be able to arrange loans of more modest amounts?

Lord Lucas: My Lords, clearly some sources of finance are closed to small institutions. If one wants to make a public bond issue in the UK capital markets, it must be of a certain size and £5 million would not be a viable amount. So a smaller institution may end up paying more for its capital. On the other hand, being a small institution may be an advantage in seeking joint ventures with industrial companies which are not looking to spend £50 million a time.

Lord Pearson of Rannoch: My Lords, does my noble friend agree that British universities might have a better chance of raising finance, both of a capital and an income nature, if the quality of education which they delivered—particularly in the teacher training, social sciences and humanities departments —were somewhat better than it is at the moment?

Lord Lucas: My Lords, my personal view of university education is that we have an extraordinarily good system which shows every sign of getting better year by year. Universities are putting a great deal of effort into ensuring that they improve the quality of their teaching. We applaud them for the efforts they are making and are pleased with the results they achieve. However, as in all aspects of education, we believe that there are opportunities for making this year better than last.

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Mr. Gordon Foxley: Legal Aid

3.7 p.m.

Lord Boyd-Carpenter asked Her Majesty's Government:

    What was the total cost to public funds of the legal aid granted to Mr. Gordon Foxley.

The Lord Chancellor (Lord Mackay of Clashfern): My Lords, the total amount of criminal legal aid paid so far to lawyers acting on behalf of Mr. Foxley is £160,228, including value added tax. No money has as yet been paid from the legal aid fund in respect of the civil proceedings between the Ministry of Defence and Mr. Foxley.

Lord Boyd-Carpenter: My Lords, I thank my noble and learned friend for that interesting Answer. Can he say whether payments of that size to those indulging in litigation at a cost to the taxpayer are common, or is this a rare example?

The Lord Chancellor: My Lords, first, one must remember that this was a criminal case brought against Mr. Foxley by the prosecuting authorities. Compared with recent examples which I have given in Answers to my noble friend Lord Boyd-Carpenter, the cost of this one is comparatively small. I inquired into the detail of how that could possibly come about. The answer was that the case was only over eight days, some of which were days when it was not possible for the court to sit. On one occasion, the trial had to be adjourned because of ill-health on the part of a juror. On another day, it was because of ill-health on the part of the defendant. So the total amount of work spread over those days was not as large as it might seem. However, the amounts are ultimately subject to taxation by the taxing masters of the court.

Lord Williams of Mostyn: My Lords, does the noble and learned Lord agree that there is significant public concern about moneys—however modest in the present case—being donated to people who are extremely wealthy, apart from being extremely dishonest and corrupt? Will the new regime which the noble and learned Lord envisages ensure that the likes of Mr. Foxley will not receive public money on this scale in the future? Can the noble and learned Lord assure the House that every effort will be made to recover from this man every single penny which he has received from public funds?

The Lord Chancellor: My Lords, there is no question of money having been donated from public funds to Mr. Foxley, or anyone else, in respect of legal aid. Mr. Foxley faced criminal charges before a criminal court and in accordance with the primary legislation approved by this House, and the secondary legislation made under that law, his means are assessed by the court. Legal aid follows on conditions related to that assessment if the interest of justice so requires. Subject to any changes that may be intimated in due course, that is the system at present and nothing that I have suggested would change it.

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I have recently made suggestions for bringing into account, for example, the equity value in a home which is more than £100,000. I made a change of that kind. However, the other aspect I have to emphasise is this. The Lord Chancellor and his officials are precluded from inquiring into the financial circumstances disclosed to the court of the legal aid authorities by the confidentiality provisions of the legal aid legislation. I am quite unable to find out, therefore, and it would not be proper for me to inquire into, the detailed circumstances of particular people. However, from what I have seen I have the impression that there may be some who are less than frank to the legal aid authorities in the detail of their finances. I have proposed, and I am pursuing, the setting up of a special unit to investigate the finances of such people. The difficulty is to give criteria in advance by which such a class of person can be determined. It is a difficult issue which I seek to address and I am sure that your Lordships wish to support me in that address.

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