Tuesday Volume 555 11 December 2012 No. 84 HOUSE OF COMMONS OFFICIAL REPORT PARLIAMENTARY DEBATES (HANSARD) Tuesday 11 December 2012 £5·00 © Parliamentary Copyright House of Commons 2012 This publication may be reproduced under the terms of the Open Parliament licence, which is published at www.parliament.uk/site-information/copyright/. 131 11 DECEMBER 2012 132 the upside by taking a public sector stake and having House of Commons the public sector on the board; and at the Budget we will set out a control total for PFI 2 liabilities. Tuesday 11 December 2012 Helen Goodman (Bishop Auckland) (Lab): The Chancellor says that things are getting better, but Essex The House met at half-past Eleven o’clock county council has issued a social impact bond on which it proposes to pay 12%—six times the price of PRAYERS gilts—and the Government are putting £20 million into subsidising this financing. Why are the Government wasting money like that at a time of austerity? [MR SPEAKER in the Chair] Mr Osborne: I think that most people in the House—I BUSINESS BEFORE QUESTIONS thought this was the case in all parties—welcome the innovative work being done on social financing and social CITY OF LONDON (VARIOUS POWERS)BILL [LORDS] impact bonds. Sir Ronald Cohen is one of the leading (BY ORDER) advocates of this and has been advising the Government. Second Reading opposed and deferred until Tuesday It is all about trying to get new forms of financing into 18 December (Standing Order No. 20). improving our society. I would have hoped she would have welcomed that, rather than criticising it. Mr Andrew Tyrie (Chichester) (Con): Many on the Oral Answers to Questions Treasury Select Committee are already concerned that Whitehall Departments might again find themselves addicted to the “get something now, pay later” culture that bedevilled PFI the first time round. What is also TREASURY concerning us is that a number of the proposals set out by the Government—I refer, in particular, to page 13 of The Chancellor of the Exchequer was asked— the document produced—look more like motherhood and apple pie than something substantive enough to Private Finance Initiatives offset that Whitehall pressure. Will the Chancellor assure the House that, excluding value-for-money considerations, all accounting incentives to remove PFI from balance 1. Mr Edward Leigh (Gainsborough) (Con): What sheets will now be closed off to Departments? plans he has for future private finance initiatives. [132493] Mr Osborne: I say to the Chair of the Treasury Select The Chancellor of the Exchequer (Mr George Osborne): Committee that we will set out at the Budget—of course, Last week, the Government announced the details of a he will want to scrutinise this carefully—a new control new approach to replace the private finance initiative total for the off-balance sheet liabilities of PFI. We with private finance initiative 2, which is a more transparent already now publish the whole-of-Government accounts approach to securing investment in public infrastructure. so that people can see the liabilities built up under the The Government will become a shareholder in future previous Administration. The country now has more projects. We can all see now that the public sector was than £280 billion of PFI debt, of which only £40 billion sharing the risk under PFI. We will now ensure that we has been paid off, so he is absolutely right to hold our also share in the rewards. feet to the fire to ensure that we properly account for this and remove perverse incentives in Whitehall. We Mr Leigh: I looked at PFI for nine years on the Public want the private sector investing with us in public Accounts Committee. I am sure people will agree that it services, however, so it is important that we have the was a good system that was scandalously misused to rip right regime. off tomorrow’s taxpayers for the sake of today and to rip off the public sector in favour of the private sector. Mr Geoffrey Robinson (Coventry North West) (Lab): How can the Chancellor assure the House that, if he is The House will be pleased that the Chancellor is not to use PFI 2 to pay for large infrastructure projects, we trying to get rid of PFI, but trying to improve it in those will not repeat the mistakes of the past? areas where it can be improved. What does he mean, however, when he says that the Government will take a Mr Osborne: I sat on the PAC under my hon. Friend’s stake in the projects? How will he do that? It will need chairmanship and I remember our investigations into more than a director on the board, which I heard him various hospital and prison schemes that had gone wrong. say. As we saw it, there were three problems. First, contracts were very inflexible, so it cost a huge amount to do Mr Osborne: We propose to take a public sector share things such as change light bulbs or clean hospitals and and put in an equity stake on behalf of the public the like. Secondly, the private sector got all the upside of sector. It will be a minority stake, but it means that we the projects and made more money than expected. will share in the upside, and, of course, in order to keep Thirdly, there was no control on the overall off-balance an eye on our investment, we will have a director on the sheet total. We are addressing all three: we are creating board representing the public sector, which was not more flexible and transparent contracts; we will share in the case in previous projects. 133 Oral Answers11 DECEMBER 2012 Oral Answers 134 Tim Farron (Westmorland and Lonsdale) (LD): [Interruption.] The shadow Chancellor from a sedentary Cumbria’s health service is under immense pressure position said, “That’d be a good idea,” but he was going because of PFI deals going back a decade and more. to put the rate up when we came into office. We have cut What can the Chancellor do to go toe-to-toe with the the rate to 20% and increased the annual investment private sector to renegotiate existing PFI deals to ensure allowance. that more money goes to front-line health services? Chris Skidmore: Does the Chancellor agree that Mr Osborne: We are seeking to renegotiate existing increasing the annual investment allowance from £25,000 contracts to get better value for money for taxpayers to £250,000 will make a huge difference to local small and local communities. I have a figure here showing businesses and lead to additional and vital job creation that in north Cumbria the public were being charged in the private sector? £466 to replace a light fitting under the PFI contract that was signed. That is completely unacceptable—it is Mr Osborne: I think it will help, alongside the reduction people being ripped off. That is what we are seeking to in the small company rate. I am pleased that the Federation end. of Small Businesses said we had listened to the concerns of members, and the chambers of commerce were also Business and Job Creation supportive. Over the next two years this measure will encourage investment from small and medium-sized 2. Mr John Baron (Basildon and Billericay) (Con): businesses, although all businesses that invest will benefit. What steps he is taking to support business creation. [132494] Andrew Jones: As someone who has set up small businesses myself, I think that encouraging small business 3. Chris Skidmore (Kingswood) (Con): What steps he creation is part of the solution to the country’s economic is taking to encourage private sector job creation. problems. Does my right hon. Friend agree that it is a [132495] sign of the strength of the private sector in this country that we have seen new businesses created in such record 7. Andrew Jones (Harrogate and Knaresborough) numbers and that this has been one of the factors in (Con): What steps he is taking to support business generating the 1 million-plus private sector jobs created creation. [132499] since the election? 9. Richard Graham (Gloucester) (Con): What steps Mr Osborne: It is welcome that more than 1 million he is taking to encourage private sector job creation. jobs have been created in the private sector. We now [132501] have record female employment, which is also welcome, while the number of those on out-of-work benefits has The Chancellor of the Exchequer (Mr George Osborne): fallen by 190,000, which is something I hope everyone Some 1.2 million private sector jobs have been created would welcome. since the first quarter of 2010. Last year more new businesses were created than in any other year on record. Mr Speaker: I call Richard Graham. Not here. In the autumn statement we took further steps to support job creation and business creation by reducing the Mr Pat McFadden (Wolverhampton South East) (Lab): corporation tax rate to 21%, extending the small business May I congratulate the Chancellor on his U-turn on rate relief scheme to support 500,000 small businesses capital allowances for manufacturing industry? When and increasing by tenfold the annual investment allowance did he realise that his previous stance of dismissing to £250,000. them as complex reliefs was wrong and at total variance with the Government’s stated aim of supporting Mr Baron: The Labour Government more than doubled manufacturing? When did his conversion to supporting the national debt. This Government have done well to these allowances take place, as long called for by Labour reduce the deficit by 25%, but this still means that we Members and the Engineering Employers Federation? are adding to our debt, albeit at three quarters the pace.