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Baroness Cumberlege: Perhaps I may help the noble Baroness. I refer to the speech by her honourable friend Mr. Milburn. He stated:
- "Those schemes that fail to make the list, for whatever reason, will be invited to stop any further work, decline any tenders they have and stand down preferred partners if they have selected them".
Baroness Jay of Paddington: My honourable friend Mr. Milburn was referring to the strategy of the national programme on PFI schemes as regards which, as with the noble Lord, Lord Jenkin, there will be people who will be disappointed because their schemes will not be included in the priorities.
Baroness Cumberlege: Will the noble Baroness say whether or not they will receive compensation?
Baroness Jay of Paddington: That will be up to the individual contractors to discuss with those with whom they were forming the financial arrangements.
Lord Ezra: Having listened to this interesting and lively debate, I believe that my noble friend Lady Robson was fully justified in putting forward the amendment. I am pleased that the noble Lord, Lord Rea, pointed out that the purpose of the amendment was to initiate just such an exchange of views.
I fully recognise the difficulty of achieving a proper definition. I agree with all noble Lords who made that point; we foresaw that at Second Reading. On the other hand, we believe it necessary before the Bill proceeds further at least to attempt some definition of clinical services. As do those on the Government Benches, Members of the Committee on these Benches believe that clinical services should be excluded from PFI. The problem as ever is the grey area. The announcement made today by the Minister has eliminated certain aspects of the grey area; it has become clearer in colour. No doubt, as time goes on, the issue will be further clarified. I hope that there will be clarification before the Bill finally passes through another place. All
concerned will then be well aware of what is involved in the reference to services. I beg leave to withdraw the amendment.Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Baroness Turner of Camden): I must tell the Committee that if Amendment No. 5 is agreed to, I cannot call Amendment No. 6.
Lord Brightman moved Amendment No. 5:
The noble and learned Lord said: This amendment and Amendment No. 6 seek to clarify subsection (6). I do not expect that the discussion on this amendment will prove as absorbing as the debate we have just heard. Subsection (6), omitting a few words for brevity, reads as follows:
Any agreement would by definition be an externally financed development agreement if so certified. I therefore have difficulty in seeing what exactly the subsection does. I think, although I am not certain, that it probably seeks one of two things. Either it seeks to say that the absence of a certificate does not invalidate an agreement if the agreement is one which the NHS trust had power to enter into apart from the Act; or, more probably, it seeks to say that an uncertified agreement is valid if it is one which the Secretary of State would have certified if an application for a certificate had been made because the requisite conditions are fulfilled. The latter construction seems to accord with what is said in the Notes on Clauses.
I have tabled two amendments to cover the two possibilities. Amendment No. 5 takes out the whole of subsection (6) and states:
I wonder whether the Minister would consider referring the wording of subsection (6) back to the draftsman to see whether its purpose could be more plainly expressed. I beg to move.
Viscount Ullswater: I support Amendment No. 5. At Second Reading when we discussed the vires of a trust in concluding PFI agreements, I made a point which I believe was correct in its interpretation; namely, that the Bill will cover major projects which are externally financed but will not cover a deal where the private sector contractor finances the project from its own resources. In her reply--and I am grateful to her for putting the reply forward--she said that Clause 1(6), the clause that is now subject to this amendment,
I wonder whether the Minister was in fact correct in the advice that she received on that occasion. As the noble and learned Lord, Lord Brightman, indicated, there are two halves to subsection (6). Clause 1(6) makes it clear that the section will not affect the validity of an agreement made by a trust only if, first, the agreement has not been certified under the section and, secondly, it,
Amendment No. 5 would set out clearly on the face of the Bill that, where there is no other party (it does not use those words, but has that effect) and therefore no certificate, the validity of an agreement is not at risk. Does the noble Baroness not see that as a form of clarification--not seeking to amend the terms of the Bill but merely making the provision clearer on the face of the Bill in relation to the many smaller projects?
Baroness Anelay of St. Johns: The noble and learned Lord, Lord Brightman, commented that discussion on this amendment might not be as absorbing as on the previous one. It is no less welcome than the previous amendment. The noble and learned Lord is trying to clarify a matter which underpins whether or not contractors feel secure in the way in which they enter into agreements. The noble Viscount, Lord Ullswater, drew to our attention the worries that smaller contractors might face.
On this side of the Committee we welcome any clarification in subsection (6) provided that it does not necessarily hold up proceedings. However, we should not wish any such clarification to alter the policy intention as we see it behind subsection (6) as it currently stands. On that basis, we are neutral in relation to this amendment.
When I originally examined the noble and learned Lord's amendment I had some difficulty. At that stage, given the way in which it was phrased, referring to "any agreement", it appeared that agreements might go out with the normal range of PFI contracts. I am grateful to him for his explanation today. It clarifies that matter.
Provided the policy intention is not changed by this clarification, we remain neutral on the amendment.
Baroness Jay of Paddington: I am grateful to the noble Baroness, Lady Anelay, to the noble and learned Lord for his suggested amendment, and for the contribution made by the noble Viscount. As the noble and learned Lord said, the amendment reflects an interest in replacing the wording of the existing subsection (6). We have considered the amendment carefully. However, the legal advice we received is that it does not improve the meaning of the Bill, nor does it correct an error or omission. We feel that the existing text satisfies the reasonable concern that the validity of an agreement which meets the conditions set out in subsection (3) cannot be challenged merely because it has not been issued with a certificate under this clause.
The amendment suggests that the validity of any agreement into which a trust enters, whether externally financed or otherwise, should not be affected. However, the advice I received is that it is unnecessary to make the point since a trust has express powers to enter into such contracts--under paragraph 16 of Schedule 2 of the 1990 Act which set up the trusts. The Bill is specifically designed, as I have said several times both on this occasion and at the Second Reading, only to address the question of externally financed development agreements, about which the banks have expressed concern, and not any other kind of contract. It leaves the validity of self-financing deals entirely untouched. We therefore do not see any reason to accept the amendment. The self-financing equity funded schemes are not covered and it was never intended that they should be. I hope that that satisfies the noble Viscount. It was a point that he raised at Second Reading and I hope that my remarks clarify it.
In addition, there is the general financial case that I have made on a number of occasions that the banks, waiting to lend and go ahead with the schemes--and the noble Baroness, Lady Anelay, confirmed her point of principle in wishing to support that intention--have seen and agreed the wording of the Bill. Their legal advisers have made it clear that it satisfies all their outstanding concerns, which are related to major hospital building projects. If we now change the wording of the Bill with no good cause, it will risk creating doubt and delay, which I think we all agree would be unfortunate, on a matter which is generally agreed. Even if we do not agree on the detail, it is a timely piece of legislation. I therefore ask the noble and learned Lord not to press his amendment.
Page 1, line 26, leave out subsection (6) and insert--
("(6) The absence of a certificate given under this section shall not affect the validity of any agreement to which a National Health Service trust is a party and which it had power to enter into apart from the provisions of this section.").
"Nothing in this section affects the validity of any agreement ... if the agreement ... has not been certified ... but would have been an externally financed development agreement ... if it had been so certified".
"The absence of a certificate given under this section shall not affect the validity of any agreement to which a National Health Service trust is a party and which it had power to enter into apart from the provisions of this section".
Amendment No. 6 leaves in paragraph (a) of subsection (6) but rewrites paragraph (b) so that the subsection as a whole would read:
"Nothing in this section affects the validity of any agreement made by a National Health Service trust if the agreement--
(a) has not been certified under this section; but
(b) would have been so certified if an application for a certificate had been duly made".
4.30 p.m.
"provides that nothing in the Bill affects the validity of an agreement between a trust and a private contractor which does not have a certificate ... Apparently there is clear legal advice that trusts are able to enter into contracts without a certificate and the certificate process provides concrete reassurance to the banks which are funding the larger schemes".--[Official Report, 3/6/97; col. 612.]
That would seem to indicate that the Bill's concern is only with the larger projects and that perhaps there is not so much concern for the many smaller projects coming forward under the PFI initiative.
"would have been an externally financed development agreement for the purposes of this section if it had been so certified".
Because of the second part of the requirement, only those agreements that fall within the definition of an externally financed development agreement will be protected by Clause 1(6) as it stands. I am advised that the definition does not include those contracts where the contractor or service provider is providing the finance itself.
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