Q111 Lord MacGregor of Pulham Market: Why then do you think that you have this constraint in terms of school building? Why is that linked entirely to PFI?
Mr Buxton: How are you going to build a school without the capital subsidy? That is the issue for a local authority. A local authority cannot afford to go around building schools without some form of subsidy.
Q112 Lord MacGregor of Pulham Market: I understand that but why do you think that the Central Government is insisting on that?
Mr Buxton: Central Government has done a programme level value for money study and concluded that at a programme level PFI is value for money for the delivery of schools.
Councillor Kemp: Because it is looking at the savings of bigness, whereas as we said before we can also make savings through smallness. We are not getting the benefits of local knowledge, the full application of local services and opportunities into what is effectively a national programme delivered locally.
Mr Buxton: We should also recognise that most school refurbishment is not taking place through PFI. It is much more effective for new build than for refurbishment and the Government fully understands and recognises it, which is why if you look at capital spend on education it is not a case of saying all capital spend on education is PFI, that simply is not the case.
Q113 Lord Eatwell: It seems to me that the crucial difference with respect to your financing is the constraints that you are placing on the future, and where the future is unknown, such as how technology might change with respect to teaching, or population structures might change, you are stuck. That seems to me to be a major issue, that by having a PFI contract you have committed a set of funds contractually over the future to the delivery of a particular building or services of that building or other services which you may, in 10 years' time, not need, but you have it, you are stuck.
Mr Buxton: If you are building a road you are putting in street lighting and the chances are that level of certainty-
Q114 Lord Eatwell: No, let us stick with the school. You have a school building and you get a big population shift. As a local authority you might want to say, "Okay, we will take half those buildings and we will use them for something completely different."
Mr Buxton: Absolutely.
Q115 Lord Eatwell: You have a contract to have those things maintained in a particular way, services provided in a particular way, which may be completely irrelevant for the purpose that you want in 10 years' time, but you are stuck.
Councillor Kemp: Basically you are right, but we would end up with that constraint if we build a traditional school now and we would still be saying in 10 years' time, "What are we going to do with that school?" That comes to the relationship that you have with your contractor because at the end of the day it is in no one's interests to be paying out for a building that is empty, so what will local authority come up with in private sector circumstances about using the half of the building that you no longer need. I am not trying to underrate what you say because clearly if you are in a contract it is more difficult to get out of than if it is your own building which you entirely own or whatever. There are some constraints but I would not overplay that because it is in everyone's interests to make these buildings work, including the private sector.
Q116 Lord Levene of Portsoken: When PFIs and PPPs were first introduced the rationale was that both Central Government and local government had a pretty poor record of managing large-scale projects, particularly construction projects, so it was felt that by giving these to the private sector they would have a better chance of delivering them on cost and on time and their own overheads would still make the whole project cheaper. This has been going on for the best part of 20 years now. I do not want to ask you about Central Government, but has local government now learnt enough from this, from overseeing these projects, that they can now do it themselves efficiently as one would hope they would have been able to do in the first place?
Councillor Kemp: A lot of the pre-work, of course, is done within the local authority now. In any big project the local authority, being an excellent client, knowing what it wants, being able to deliver its part of it-for example, you can have a PFI project which needs the local authority to deliver the road system differently to meet it-is up for the major challenges that it faces. Local government has moved on tremendously both managerially and politically in the last 10 to 12 years so I think they are capable of managing it using all the routes.
Q117 Lord Levene of Portsoken: So if a decision was to made to say, "Here is a pilot project, let us give it back to local authority X and see if they can do the whole thing themselves", they might make quite a good fist of it?
Councillor Kemp: We are doing it already because, as we said, PFI is only 10% anyway, so for the other 90% we are already doing it. There is no evidence that we have on which of the procurement routes you use for the money, if I can put it that way, changes your ability to deliver things quickly or slowly, efficiently or inefficiently. I think that we are good enough clients to be able to cope with any of the financial routes which would enable us to use capital.
Q118 Lord Levene of Portsoken: If that is true, and I have no reason to doubt what you say, then it would infer that Central Government ought to look very carefully at this because if the local authorities are now so good at it that they can do it themselves, so why not leave it with them? Somebody presumably ought to have a look at that.
Councillor Kemp: We would be happy to look for the evidence. Our general feeling is-and this is a Treasury quote not mine-that local government is the most efficient part of the public sector. I would not necessarily let the PCTs run the same way!
Chairman: On that note, Councillor Kemp, we can draw a close! Thank you very much to you, Councillor, and to Mr Buxton for your time and for answering our questions.