Q77 Chairman: Welcome to the Economic Affairs Committee. This is the second public hearing of our inquiry into private finance projects. Copies of the Members interests or their entries into the Register of Interests showing interests which have been declared are available for the public and witnesses. It is the big tome there on the table if you wish to take a look at that. Councillor Kemp and Mr Buxton, thank you very much for coming. We would be very grateful if you could speak as clearly as you can for the benefit of the webcast and the shorthand writer. Do either of you want to make any opening statements or would you prefer it if we went straight into questions?
Councillor Kemp: We are quite happy to answer questions, my Lord.
Q78 Chairman: On the questions side, you do not both need to answer.
Councillor Kemp: I think we have decided that if it is technical the officer will answer.
Q79 Chairman: Perhaps I can make a start by asking you what are the main areas where local authorities engage in private finance projects? How important are they compared to other areas of local authority activity?
Mr Buxton: I think by far and away the largest area of activity for local authority PFI projects is in relation to education where there has been a major programme specifically to build or refurbish schools. Other areas include housing, transport, social care. An important point is that actually the local authority PFI expenditure amounts to a relatively small proportion of total local authority capital investment. Over the course of the last five years we are looking at figures of in the range of 10-15% of local authority capital investment. I think it is important to see PFI very much in the context of an overall approach to local authority capital investment and not to regard it as, in a sense, the most burning and critical issue relating to local authority investment.
Q80 Chairman: You said then that PFIs are a minority sport, as it were, but how do local authorities decide whether to use the private finance route or some other route?
Councillor Kemp: This is one of our concerns, that there is not necessarily flexibility to enable us to choose PFI or prudential borrowing or standard routes, we are more or less guided into a particular project by the government finance being made available for PFI. One of the things that we do think we need is more flexibility so that we can choose the appropriate financing route for the appropriate project.