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Lord Howarth of Newport: My Lords, does my noble friend agree that hospitals and schools ought to be well designed, handsome buildings, both as a statement of public values and because good design commonly leads to better value for money over the lifetime of the building? I welcome recent Treasury statements about the need for more design work before PFI projects go out to tender, along the lines proposed by the RIBA, but how do the Government intend to reform PFI methodology to accommodate the requirement of good architectural quality in the procurement of public buildings? I declare an interest as an honorary fellow of the RIBA.

Lord McKenzie of Luton: My Lords, the Treasury's existing policy is articulated in Treasury Technical Note 7, but it has been made clear that that will be
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withdrawn and reissued—in the autumn, it is hoped—after discussion with the market, including but not exclusively with the RIBA. The Treasury welcomes the RIBA consultation on design in PFI. It met the RIBA in March to receive feedback on its own market consultations on design in PFI. The Treasury supports its objectives of making the procurement process more efficient and less expensive, and it has expressed its private views on the feedback so far. The Treasury will continue to work with the RIBA and other market stakeholders to refine the design process in PFI to meet its policy objectives. However, that should not be taken as an acceptance or rejection of the RIBA's specific proposals, which are part of the debate rather than the only solution or a widely accepted solution to some concerns about the process of design in PFI.

Lord Newby: My Lords, does the Minister accept that many on this side of the House find the phrase "value for money" almost risible in connection with the financing of PFI contracts? The case of the hospital that he mentioned was a major scandal. Will he suggest to his colleagues in the Treasury that sharing the benefit when refinancing takes place, where the state gets a mere 50 per cent of the benefit and the contractor gets the other 50 per cent for no huge additional activity—a simple, straightforward financial transaction— is not acceptable? Will he further suggest to his colleagues that no more PFI contracts should be entered into until a much harder bargain is driven by the Treasury in such cases?

Lord McKenzie of Luton: My Lords, the Norwich and Norfolk University Hospital PFI scheme was successful in that it opened on time—in fact, ahead of schedule—and to budget. One of the major changes driven by the PFI scheme is that projects now come forward on time and to budget, whereas before most public capital projects were late and over budget. I disagree with the noble Lord's assessment of the 50:50 split; refinancing is generally possible only if there is a market producing liquidity which helps further funding of new schemes and if the risk has been successfully managed by the private sector. That happened in this case. In fact, the investors took, or expected to take, less cash out of the project, but they took it earlier. It depends in a sense on what discount rate you apply to that to evaluate the sort of returns that investors eventually got from the scheme.

Baroness Noakes: My Lords, a year ago the Office for National Statistics said that it was looking at how it could get the debts under PFI into the calculation of government net debt, something that accountants such as the noble Lord could do with ease. Why has nothing yet happened? Could it have any connection with the fact that, with the PFI debts included, the Chancellor's sustainable investment rule would be breached?

Lord McKenzie of Luton: My Lords, I am aware of no basis for that latter assertion. We account and budget for PFI in line with international best practice.
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At the moment, schemes that are on balance sheet are included in the public sector net investment and public sector net borrowing. The noble Baroness is quite right about the net debt: that was reported to the Treasury Committee some while ago, and we have spoken about it previously. It is being looked at by the Office for National Statistics, which is expected to report during the summer.

One cannot simply look at the whole stream of payments due under PFI schemes, because they are bundled services. To see whether there is a debt equivalent, you have to unbundle those services and take account of the fact that capital is already being paid down yearly under those schemes.

Lord Sheldon: My Lords, is there not a serious problem in that the PFI covers not only design, finance and build, which can be determined reasonably accurately, but the quality of service, which is difficult to define, let alone over 30 years? That has led the Public Accounts Committee, as my noble friend has said, to call the consortium the "unacceptable face of capitalism". Is it not clear that a serious mistake has been made in these PFI arrangements?

Lord McKenzie of Luton: No, my Lords, that is an unfair characterisation of PFI arrangements. The research that the Treasury has recently undertaken shows that 96 per cent of projects are performing at least satisfactorily; 83 per cent of contracts are described as almost or always giving an accurate specification of the services required; and 97 per cent of public sector contract managers rated the relationship with their private sector counterpart as satisfactory or better. These arrangements are working. They are not the only route to deal with public procurement; they will continue to be a small but important part of the Government's attempts to redress years and years of underinvestment in our public services.

Lord Howe of Aberavon: My Lords, I wonder whether the noble Lord's research, conducted with the help of the Treasury, extends as far back as almost a quarter of a century ago, when I invited Sir William Ryrie to study the matter with a view to achieving the opportunities that the present Chancellor has all too easily enjoyed. He enunciated the so-called Ryrie rules, which warned against the very hazards about which my noble friend and others are complaining. Will the noble Lord not re-examine those warnings?

Lord McKenzie of Luton: My Lords, it is not research with which I am personally familiar, but I will certainly examine it, as the noble and learned Lord suggests.

Lord Brooke of Alverthorpe: My Lords—

The Minister of State, Department for Environment, Food and Rural Affairs (Lord Rooker): My Lords, we are in the 16th minute, and that one had a really good go.

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Judicial Independence

3.3 pm

Lord Goodhart asked Her Majesty's Government:

The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, a strong, independent judiciary is essential to the rule of law, public safety and the protection of the individual. The Government are fully committed to the independence of the judiciary. It is my duty as Lord Chancellor to defend judicial independence and to ensure that all Ministers are aware of and comply with their obligations to uphold it. These principles are enshrined in the Constitutional Reform Act.

It is important to recognise that the preservation of judicial independence does not and should not stifle legitimate debate on issues of public concern. The Government and the judiciary have different and clear constitutional roles, but they share a key objective to do all they can to ensure the safety of the public.

Lord Goodhart: My Lords, Section 3 of the Constitutional Reform Act specifically requires all Ministers of the Crown to uphold the continued independence of the judiciary. Were a Minister of the Crown at any level from the lowest to the highest to describe a judicial decision as an "abuse of common sense", particularly at a time when that decision was under appeal, would the noble and learned Lord the Lord Chancellor regard that as legitimate debate? Does the noble and learned Lord agree that, while the Sun is free to attack the judiciary as offensively as it likes, short of defamation, the same freedom is not enjoyed by Ministers?

Lord Falconer of Thoroton: My Lords, I agree with the noble Lord that Ministers are under an especial obligation because confidence in the judiciary depends in part on what Ministers say. The noble Lord is referring to what my right honourable friend the Prime Minister said about the decision of Mr Justice Sullivan in relation to the Afghan hijackers. I discussed his comments on Mr Justice Sullivan's judgment with the Lord Chief Justice, and we both agreed that they did not have the effect of undermining judicial independence nor were they intended to do so. The issue of whether or not the Afghan hijackers should go back is a matter of legitimate debate, which the Prime Minister is entitled to engage in. That is the view that the judges take.

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