---

Public Services

My Lords, the noble Baroness, Lady Walmsley, has selected an intriguing subject for today’s debate. It is a multi-layered topic which has provoked some diverse perspectives in our debate. I do not normally have much sympathy for the Minister, but I do so today because in his winding-up speech he must produce some form of synthesis of the varying points that have been made. In preparing for the debate, I asked the Library to find out how much the Government spend on the private sector each year to deliver public services, but, having carried out its research—extremely diligently, I am sure—it came back with no answer at all. We have therefore to debate the noble Baroness’s interesting Motion in an information void, which, as an accountant, I find disturbing. According to the Budget Book released yesterday, the public sector will spend around £340 billion on goods and services, including capital, next year. Can the Minister say how much of that will be spent via the private sector, and if not why not? The noble Baroness, Lady Walmsley, asked whether the public sector gets quality and value for money in its dealings with the private sector. When we talk about transactions with the private sector, we are often drawn to think about the private finance initiative. The PFI was invented by my party and by 1997 we had overseen a relatively small number of contracts, testing out the parameters of risk transfer which was the heart of our approach. Since 1997 the Chancellor has enthusiastically driven the use of PFI as a source of public sector investment and overseen contracts for well over £50 billion. The noble Lord, Lord Wallace of Saltaire, referred to £46 billion but every day more contracts are signed and the figure rises ever higher. The annual cost is currently around £7 billion, due to go over £9 billion in 10 years’ time. So we are talking large sums of money involved in PFI. One worrying feature of PFI is the way that some completed projects have been refinanced to produce significant gains for PFI consortia. The later generations of PFI contracts have ensured that the public sector captures some of those gains, but the uncomfortable truth is that the PFI industry is built not so much around service provision but around significant financial engineering and highly leveraged structures, with high rates of return often matching high risks that are often best managed in the public sector. Can the Minister explain how this delivers value to the public sector? Another uncomfortable feature of the PFI is the fact that the public sector is tied into contracts for25 or 30 years, burdening future generations of taxpayers with paying for, say, hospital configurations which have been designed for today’s era. The noble Baroness, Lady Walmsley, referred to this problem. Of course, the contracts allow for changes over time but only at a price which will in turn increase the burdens on future taxpayers. The problem here is that we will not know whether these contracts represent long-term value for money for some years to come but long-term value will become of increasing prominence as the contracts mature. Do the Government have any systematic way of monitoring long-term value from these contracts so that any problems that may start to emerge from PFI contracts can be anticipated and dealt with before they end up destroying value for taxpayers? The Government have continued to make progress on the professionalism of contracting and commissioning, as has been referred to today, but some dreadful mistakes continue to be made, especially in the area of IT. The Child Support Agency has wasted many millions of pounds on two failed systems. Her Majesty's Revenue and Customs, which outsources its IT, has had its share of problems, recently with the tax credit system where IT problems were compounded by design faults which resulted in overpayments of more than £2 billion each year and misery for hundreds of thousands of taxpayers. The Minister will be aware that transferring risk to the private sector does not automatically ensure value for money. The National Physical Laboratory PFI contract, on which the Public Accounts Committee in another place reported last week, is testimony to that. The department concerned used hope rather than rigorous analysis to guide it. The private sector contractors assumed significant risk and they duly took a financial hit but the public sector still incurred a cost over-run and lost five years in the process. Does the Minister think there are any lessons to be learnt here? I completely agree with the noble Baroness, Lady Walmsley, that transparency is extremely important. There is a disturbing trend in public sector procurement for the details of contracts with the private sector to be concealed under the guise of commercial confidentiality. The Government liberally use the commercial confidentiality let-out clause in Section 43 of the Freedom of Information Act to refuse to answer requests for information on government contracts. And the noble Baroness, Lady Stern, referred to the particular issue of non-availability of contracts for prisons run by private sector contractors. We have seen in the NHS IT programme that stringent confidentiality requirements have been imposed on its contractors. We will have to await the obituary on the project to find out whether that has added any value to this vast programme but we do not believe that obsessive secrecy adds value or that secrecy operates in the public interest. During the passage of the Identity Cards Bill last year, the Government refused to disclose the full costs of the programme. Even today, the Department for Work and Pensions is defying the Information Commissioner on its ID card programme. It is not surprising that so many distrust the Government on ID cards and the national identity register. Openness may be difficult, but it serves the public interest. In general, we believe, to quote US Supreme Court Justice Brandeis, that ““sunlight is the best disinfectant””. That is why I introduced the Government Spending (Website) Bill in your Lordships' House late last, year which requires the Government to open up government spending by way of a publicly searchable website. I am grateful to the House for allowing my Bill to pass last week. I hope that the Minister today will commit the Government to granting it a speedy passage in another place. The Motion of the noble Baroness, Lady Walmsley, focuses on public services commissioned from the private sector, but issues in public services are not confined to the ones delivered by the private sector, as the noble Lord, Lord Warner, reminded us. I agreed with much of what he said today, including what he said about the indifference of the public as to who provides the services. Many services are still provided by the public sector and quality, value for money and transparency are of equal or greater importance for those. Quality and value-for-money measurement in the public sector remains primitive. The Office for National Statistics, when pressed by the Government to measure quality in order to make up for the underlying loss of efficiency shown in many public services, has come up with some answers but I do not believe that these are regarded as wholly convincing by many people who have looked at them. On efficiency, we might think that the Government had good mechanisms for measuring it, given the way that they have trumpeted the prospective £21 billion of efficiency savings identified by Sir Peter Gershon. The Chancellor has claimed that much of this has been delivered. For example, in the Pre-Budget Report last December, he said that £13.3 billion of these savings had been achieved. The National Audit Office's report on the Government's efficiency programme released a few weeks ago revealed the truth that of the £13 billion only about a quarter, "““fairly represent the efficiencies made””;" over half of the total, "““carry some measurement issues and uncertainties””;" and for the remaining £3.1 billion, in the NAO's understatement, "““there may be efficiencies taking place but the measures used either do not yet demonstrate efficiencies or the reported gains may be substantially incorrect””." Yesterday, the word ““Gershon”” did not pass the Chancellor's lips. Will the Minister say whether the Government plan to restore credibility to the Gershon efficiency programme or will the programme bequietly buried in the upcoming Comprehensive Spending Review? We are concerned that the Government do not have good processes to get value for money from their expenditure, whether with the private sector or within the public sector, and we have seen too many signs that the Government prefer secrecy to transparency. Will the Minister today commit the Government to turning over a new leaf?