Orders of the Day — Local Government (Contracts) Bill

Part of the debate – in the House of Commons at 4:54 pm on 23rd June 1997.

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Photo of Nick Raynsford Nick Raynsford Parliamentary Under-Secretary (Department for Environment, Transport and the Regions) 4:54 pm, 23rd June 1997

At one stage, I anticipated a potentially extremely long response to the debate, but, given the Opposition's decision not to divide the House, I am delighted that we have had a reasonably brief and focused debate on this excellent measure. I am therefore delighted that we will be able to bring our proceedings to an end rather sooner than many had anticipated.

I listened to the debate with great interest and I welcome the opportunity to respond to the various points that have been raised.

My hon. Friend the Minister opened the debate by explaining why we had introduced the Bill. I make no apology for briefly returning to those reasons. It is the Government's policy that local authorities should explore the scope for partnership with the private sector to achieve the best value for money in delivering services to the community. Following various high-profile court cases, doubts have arisen in the private sector about the powers of local authorities to enter into contracts for the provision of assets and services. Investors are concerned that they could suffer financially if local authorities are found to have acted ultra vires. The Government seek to end all doubts by clarifying local authorities' powers to enter into partnership contracts and by providing a means of reassurance for contractors through a simple and transparent certification procedure.

The Bill provides the framework in which authorities and the private sector can work together in confidence. It in no way undermines the rights of local taxpayers and auditors to challenge authorities where they have acted unlawfully.

The Bill should be seen in the context of the Government's policy to improve and streamline the private finance initiative and public-private partnerships. The Paymaster General, whom we are delighted to see on the Front Bench, has published today a summary and the conclusions of the review of the PFI conducted by Malcolm Bates. It sets out a clear agenda of action across the public sector to get deals delivered.

I welcome the hon. Member for Christchurch (Mr. Chope) back to the Chamber after a period of absence which is one of those accidents of political life that some of us have experienced. I also welcome him to his Front-Bench position and look forward to debating with him on future occasions. He paid generous tribute to his predecessor, Diana Maddock. Those of us who were involved in housing matters in the previous Parliament found her to be an extremely assiduous and positive contributor to debates. She also displayed such characteristics in her work in her constituency, which the hon. Gentleman acknowledged.

The hon. Gentleman offered his support for the generality of the Bill, but he slightly spoilt that good effect by claiming, with no justification, that the Government are not whole-heartedly committed to public-private partnerships. My right hon. Friend the Deputy Prime Minister advocated such partnerships years before the previous Government introduced the PFI model. I, too, argued strongly for new models for local housing companies to achieve private investment in co-operation with local authorities, again long before the previous Government advocated the PFI. I must therefore tell the hon. Gentleman that the Government will take no lessons from the Opposition either about the parentage of the public-private partnership model or about our commitment to achieving such partnerships.

The difference between the Opposition and the Government is that we are creating that model. I must tell the hon. Gentleman that the record of the previous Government was lamentable. Year after year, we heard forecasts of the new deals that would be achieved. We were told again and again that hospital contracts were about to be signed, but, at the end of the day, despite all their pledges and promises, that Government went out of office on 1 May without having signed a single hospital contract. That represented an abject failure to deliver on a policy that had bipartisan support—there was no political obstacle to it. That lack of progress was simply the result of the previous Government's failure and incompetence to drive through a policy which they said that they technically believed in.

Against that background, I find it hard to take seriously the hon. Gentleman's allegation that the new Government are not moving quickly enough. My hon. Friend the Paymaster General has moved with exemplary speed. His review of the private finance initiative was commissioned within a week of the new Government taking office. The report on it has already been received and has been published, within seven weeks of the new Government coming into office. That is exemplary speed, of which the private sector could justly be proud. It stands in marked contrast to the dilly-dallying and dithering of the previous Government, and their failure to deliver on the project.

The hon. Gentleman claimed that we had been delaying the appointment of a chief executive. The Government had no intention of anticipating Malcolm Bates's recommendations, because his was an independent review. To have acted in advance of it, in terms of the appointment of a chief executive, would have been quite improper. Now that Bates has announced his findings, which we have fully accepted and published, we are taking extensive soundings to identify the best person for the job. Malcolm Bates himself will be involved in the selection process, with senior Treasury officials. That is an indication of the Government's commitment and our speed in responding to the need for a better organised framework for public-private partnership.

The hon. Gentleman raised a number of detailed questions. He asked whether local authorities could go bankrupt. The Government do not guarantee local authorities. Authorities have substantial assets and revenue streams; therefore they are a good credit risk. That is not a matter which the Government can guarantee.

The hon. Gentleman asked whether the Government would make it easier for authorities to guarantee contractors' liabilities. The answer is simple. The capital finance regulations do not allow public-private partnership treatment to contracts that involve such guarantees, as that would involve no risk transfer. We see no reason to change that arrangement.

The hon. Gentleman asked whether there should be a maximum period for contracts, as well as a minimum period. In order to obtain the minimum lifetime cost of the assets delivered by the contract, it is necessary to ensure that there is an appropriate period for the contract. A period of 20 to 30 years is often needed, but it would be wrong to be too prescriptive and to insist that the maximum period should be 30 years. The matter must be examined properly and scrupulously, in consultation with private sector partners.

I congratulate my hon. Friend the Member for Dudley, North (Mr. Cranston) on an excellent maiden speech. [Interruption.] I apologise—he has already given his maiden speech, but he is a new Member and spoke extremely effectively and with great knowledge of the legal issues involved in partnership deals. He welcomed the Bill as a practical way of dealing with some of the difficulties, and he referred to the Financial Law Panel. That has been much involved in the thinking behind the Bill, as have other bodies, such as the 4 Ps—the public-private partnerships programme. They view the Bill as a positive step that should be welcomed in the financial markets. We are grateful for their help. I appreciate the contribution of my hon. Friend in an admirable speech.

The hon. Member for Newbury (Mr. Rendel) described our Bill as breathing the kiss of life into a moribund PFI. I agree with him. We seek to bring life back to a process that has not moved as fast as it should have.

The hon. Gentleman raised the issue of the power of general competence, which was also mentioned by other speakers. That may be the Liberal party policy, but the Government believe that there should be a different approach, with an emphasis on the power of community initiative—the power of authorities to pursue the economic, social and environmental well-being of their area. There must be limits; there is no question of local authorities having unfettered power to undertake any activity that they choose. That is not feasible in the real world. Although Liberal Members may believe that it is appropriate for local authorities to have their own defence programmes, that is fanciful. It could never be contemplated by any sensible politician.