PFI Contracts

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 22nd May 2018.

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Photo of Liz Twist Liz Twist Labour, Blaydon 12:00 am, 22nd May 2018

What recent assessment he has made of the adequacy of his Department’s procedure for authorising and monitoring private finance initiative contracts.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

The vast majority of PFI projects—86%—were signed off under the last Labour Government. Since 2010, we have reformed the approach so that PF2—private finance 2—contracts, in the selective circumstances in which they are used, now deliver better value for money for the taxpayer, so far delivering over £2 billion of savings.

Photo of Liz Twist Liz Twist Labour, Blaydon

Recent research from the University of Greenwich suggests that bringing existing PFI contracts back in house could pay for itself within two years. The National Audit Office has noted that Government Departments reported the “operational inflexibility” of PFI, so can the Chancellor explain why his Department is still pushing the increasingly discredited and scandal-ridden PFI model under the disguise of PF2?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Under the last Labour Government, the average number of PFI contracts signed per year was 55. In the last two years, the Treasury has signed off none. We will use this approach selectively when it delivers a genuine transfer of risk and provides value for money for the taxpayer, not as the last Labour Government did.

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

As the Minister said, PFI was hugely popular under the last Labour Government. Will he confirm whether PFI stands for “private finance initiative” or “pay for indefinitely”?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

My hon. Friend highlights the cost and legacy of the PFI projects signed off under the last Labour Government. Hon. Members can be assured that we will use this approach wisely and selectively, in particular for the most complex infrastructure projects requiring a transfer of risk and the expertise of the private sector.

Photo of Eleanor Smith Eleanor Smith Labour, Wolverhampton South West

On PFI hospitals, the National Audit Office report recently found

“no evidence of operational efficiency”, and that in the NHS,

“the cost of services, like cleaning…hospitals is higher under PFI contracts.”

Will the Chancellor explain why his Government persist with imposing higher costs than necessary on local health budgets instead of ensuring value for money for the taxpayer?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

I think that the hon. Lady is having amnesia. These contracts—86% of the contracts and 91% by value—were signed under the last Labour Government. In respect of some of the items that she mentioned, such as cleaning and security services, we have reformed PFI contracts under PF2 so that those items are not included in the standard contract.

Photo of Michael Fabricant Michael Fabricant Conservative, Lichfield

Would my hon. Friend be interested to learn that when I was a lowly Parliamentary Private Secretary in the Treasury in 1996 and 1997, John Major was constantly trying to make us finalise PFI contracts, but we in the Treasury refused because they were bad deals? As soon as Labour got in, they went straight ahead and entered into those bad deals.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

My hon. Friend is absolutely right. The initial intention of PFI was to transfer risk, when appropriate, to the private sector, and to drive up innovation and quality in a very small number of selective cases. That was perverted under the last Labour Government by Gordon Brown.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

We have learned from the experience of PFI; this Government—[Interruption.]

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury)

Thank you, Mr Speaker.

This Government have not. In the light of last week’s report on Carillion, we want to know whether the Minister can indicate which PFI contracts are being delivered by contractors that are deemed to be actually or potentially high risk. Following last week’s reports that failed bidders for PFI contracts will be compensated, can he rule out bailing out firms that fail even to win contracts? We need answers on these questions now, not a history lesson.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

As I have indicated, this Government’s approach to PFI is entirely different from that of the last Labour Government. The hon. Lady says that she has learnt the lessons. Well, it is a pity for the taxpayer, and for our children and grandchildren, that they were learnt so late.