Private Finance Initiative

Debate between Richard Bacon and Stella Creasy

Thursday 23rd June 2011 Westminster Hall

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I rise to speak as another member of the Public Accounts Committee, which lays claim to having had a number of debates about the PFI, as has the Treasury Committee. I congratulate the hon. Member for Hereford and South Herefordshire (Jesse Norman) on securing this interesting and important debate about the PFI, which has been a key part of investment in this country for more than a decade, and how we make the way in which we invest in our infrastructure as a country work. I have a lot of sympathy with his concerns about whether the contracts have been done to the best of their availability and what we can do to improve them. There have been a number of debates and efforts to improve them, and I welcome the fact that he is saying that there is mixed picture on the PFI in terms of where it has delivered and that perhaps we can learn from where it has not delivered.

I want to set out some of my concerns about the hon. Gentleman’s proposals for the future. What really matters, given that a record 61 projects are currently being negotiated under the PFI, is how we can learn from what has happened. That has certainly been one of our key messages on the PAC, and I am sure that my fellow Committee members agree that we need to look at what we can learn and where we can make progress. One of the things that has surprised us on the PAC, as the hon. Member for South Norfolk (Mr Bacon) has mentioned, is the way in which negotiations on the PFI have taken place and the revelation from one of the major PFI companies that it has not been talking to the Government about the possibility of a rebate, which is an issue that the hon. Member for Hereford and South Herefordshire has raised, or about where contracts might be renegotiated.

Mr Metter from the industry used the colourful phrase that he would not ask his investors to take a haircut, by which he meant that he did not feel that it was possible to look at a voluntary scheme. I would be interested to hear more from the hon. Gentleman about his negotiations with other contractors and whether he thinks there is more interest in some kind of voluntary scheme.

We all recognise that it is difficult to ask the private sector to renegotiate a contract that it has signed up to in good faith. That therefore calls into question some of the ways in which we might deal with some of the problems with PFI, particularly the way in which the initial decision to move to PFI was made, which is something that I want to address. We must also consider what it would mean if those contracts were renegotiated. I hope that the hon. Gentleman agrees that there is a real concern that, if any contract is renegotiated, especially if capital parts of a project have been completed, it is services that will actually get renegotiated. Many of us are concerned that the renegotiation of services could mean fewer services, particularly in public institutions such as hospitals. Renegotiating services could have a negative impact on many of our constituents.

More fundamentally, on the hon. Gentleman’s concerns about PFI, I hope that I can convince him that, rather than pursue a voluntary rebate—as I have said, it has transpired from our discussions with the industry that that is not what the Treasury has been doing and that the industry is not aware of such conversations—we should look at the tax status of these companies. I am sorry that he was not able to sit through the second half of our hearing, where we heard some frankly shocking evidence from Treasury officials about their approach to the situation. The issue is of particular importance to the PFI, because when a decision to go to the PFI is made, one of the value-for-money constructs is an assessment of the amount of tax that will be returned to the Exchequer through working with a private company in the UK over the course of the contract. It is set out clearly in the Green Book that the Government make an assessment not of the specific company’s tax take, but of the general tax take that can be expected from working with the private sector in the UK in order to build a project.

[Mr Bacon]

Was it not richly ironic that Revenue and Customs, of all bodies, outsourced its entire estate for all HMRC offices across the country to a PFI company that then took them offshore and based them in a tax haven in Bermuda?

[Stella Creasy]

One of the genuine delights about serving on the Public Accounts Committee with the hon. Gentleman is that he has such a wealth of knowledge and anecdotes that clearly illustrate the challenges that we are dealing with. He took part in the Committee’s session, so he will know that I have grave concerns that moving assets overseas to offshore tax havens has substantial consequences for our assessment of the value for money of PFIs. When the decision to go for a PFI project is taken, an assessment is made of the tax that we will get in return, but there is widespread evidence that many companies then move their assets overseas to offshore tax havens. In fact, the Treasury Committee took evidence showing that 91 PFI projects were owned by secondary market infrastructure funds, so we are losing money. One of the best examples of that problem is a body set up by HSBC. The HSBC Infrastructure Company Ltd, which manages a number of hospitals in this country, has made £38 million in profit from 33 PFI schemes, but it has paid just £100,000 in tax in the UK in the past six months.