Q151 Chair: I'm trying to work out the role of PFI in the future, as we come out of the credit crunch. We've said that loan rates remain high, so that will become a disincentive to go down the PFI route. Right or wrong?
Andy Rose: Could I just clarify? I beg your pardon. The £40 billion per annum, some £200 billion in the National Infrastructure Plan, the vast majority of that is delivered by the private sector, and it is not public sector capital at all. PFIs, I think, will be used selectively in certain sectors, where it's proved value for money, but the vast, vast majority of that £40 billion per annum is not public sector capital; it's raised by the private sector for investment in, for example, water, energy, digital and areas like that. That number is a much broader arena than just the areas previously handled in PFI.
Q152 Chair: In which areas can you see PFI playing a continuing role, given where we are on loan rates, which I don't think are likely to change during the CSR period?
Andrew Hudson: I think it could still have a role in the various sectors where it has had a role over the years. Certainly authorities making these judgment s will have to be very rigorous and apply the exacting tests that the NAO are calling for, in judging whether it's still value for money. They have every incentive to do that, because for most Departments, if not all, the revenue budgets, out of which future PFI projects will have to be funded, are also constrained, the same as, as you say, public sector capital is constrained. The point of the National Infrastructure Plan is to look at this in the round, as Andy says, covering public and private sector, and look at some other things we can do to try and get the infrastructure we need, by whatever means, spanning public and private, at the best possible cost? Mr Swales talked about are there any sacred cows? The one sacred cow, as far as I'm concerned, is to get the best possible value for money for every pound the taxpayer spends, which obviously is a shared interest round the group.
Q153 Chair: 'Twas ever thus.
Andrew Hudson: 'Twas ever thus, but at a time when public spending is severely constrained, it's all the more important that we redouble our efforts on that. Some of the things that the plan talks about, like looking into why we appear to have a substantially higher cost of construction in this country than some of our competitors, looking at how we can get the cost of capital for infrastructure projects down, looking at things like the Green Investment Bank as another way of bringing a certain amount of public spending to bear on getting better infrastructure for green projects, are all moving in this direction of getting the best mix. What that mix will be, will vary over time and will vary from project to project.
Q154 Chair: With the new localism, will you be allowing local authorities, whatever the new health bodies are, et al-GP Commissioning, whatever they are, commissioning bodies-will you be allowing them to take the decisions in this infrastructure world, or will you be retaining central control of all this?
Andrew Hudson: The final decisions have always been for authorities, because in the end, for local authorities, it is the Section 151 officer who has statutory responsibility for advising the council on whether something is value for money. We do certainly plan to keep going with central guidance, with the availability of central support, and with review mechanisms, because we feel that those have helped to drive better value for money across the board.
Q155 Chair: You won't stop projects at those sort of levels, at local authority level or whatever health service level we're talking at?
Andrew Hudson: Charles can perhaps explain how the Project Review Group has operated.
Q156 Chair: I know how it's operated in the past, but it's a very centralist mechanism for controlling the process of infrastructure investment. We now have a Government that says it wants to localise and decentralise this all; I'm just wondering whether this will be true of infrastructure or whether we will carry on with the current centralist controls?
Charles Lloyd: I'm out of the Treasury now, so I don't know. I suppose, in an area that creates as much attention as PFI does, my own view is that I would be surprised if there wasn't some continuing degree of Treasury scrutiny of those transactions. Exactly what that will consist of will be for others to decide, rather than me.
Chair: Okay. Anne, then Stephen.
Q157 Mrs McGuire: Can I just ask for some clarity on the £40 billion, because the implication in the Commercial Secretary's foreword to the national plan implies that that is Government money, whereas I think Mr Rose said that that was a mixture of private and public money.
Andrew Hudson: I think the-
Andy Rose: Sorry, can I clarify? There are two £40 billions, unfortunately. There is the £40 billion per annum, which is a mixture of public and private over the five years, and then there is the total of £40 billion that is public spending. Unfortunately, there are two £40 billions. When Lord Sassoon said "We are committed to invest over £40 billion in supporting project investment," that is more the public spending, where again the focus was on economic infrastructure that led to growth. The £40 billion per annum is more the total expenditure, which is the £200 billion that is referred to elsewhere.
Q158 Mrs McGuire: Which is a mixture of public and private? Or is that totally private?
Andy Rose: No, that's a mixture.
Q159 Mrs McGuire: That's a mixture. Could I just develop a wee bit the questions that the Chair has asked you about the future? If public authorities find themselves between a rock and a hard place here, i.e. there's constraint on public spending, that the market is too high, do you have any idea of what our infrastructure development is going to be like in terms of education, hospitals, whether or not these public authorities will be in a position to make decisions about investing in that type of infrastructure project? Or will we be, in fact, seeing a situation, which once happened, where there were very few schools built and even fewer hospitals?
Andrew Hudson: As far as public spending is concerned, the Government have set out the capital plans for both health and education, and that will govern what the public sector can spend over the coming four years. As to whether those Departments choose to go ahead with further PFI schemes, I think there's been a lot of attention paid to Building Schools for the Future. There's a review under way, but the intentions there are clear. On the hospital side, there's a certain amount of public sector capital available, and the Department will no doubt be considering how it wants to use its future resource budgets, and whether building further hospitals is something it wants to give priority to compared with other calls on the resource budget.
Q160 Mrs McGuire: I'm not quite sure if that's a yes or no.
Andrew Hudson: It's-