Q281 Lord Griffiths of Fforestfach: On the basis of your argument it would seem to me-
Dr Edwards: I am saying there is a predilection against the public sector probably in this room as well as outside. I think in the case of infrastructure it is bound to be more expensive for the private sector because of the cost of capital. If you look in my report I did a model of a hospital which was devised by Andersen Consulting, and I programmed this with the interest rates, and it showed that the cost of that hospital is bound to be more expensive. It is something like double because the rate of interest is double. It is as simple as that, is it not?
Q282 Lord Tugendhat: What about other factors in the cost of a PFI project?
Dr Edwards: I am saying you could do a sensitivity analysis. If you put in the Andersen model, as I did, and you put in the relative rates of interest, then I showed that the cost for the private sector has to be 40% in order to provide the same overall cost over the life of the project. It really is as simple as that.
Q283 Lord Griffiths of Fforestfach: If PFI is as bad as the two of you are unreservedly saying, why is it that the governance of both parties have continued with it?
Dr Edwards: Can we come on to that because that was the next question. The next question was: "Witnesses have told us that PFI has enabled a major updating of the NHS estate that would not have been possible otherwise. Do you agree?" Can I answer that? It is possibly true, ironically, but it is only true because of the peculiarity of Gordon Brown's fiscal rule that public sector net debt should not be more than 40% of GDP, which was a crazy rule, absolutely crazy-
Q284 Lord Forsyth of Drumlean: It has long since gone!
Dr Edwards: Because the 40% is so much lower than almost every other developed country. Perhaps we know why Gordon Brown selected that, but that was one factor which made PFI so attractive because PFI, as you know, is mostly off public sector net debt. There are only a few PFI projects which appear in the public sector net debt. That was the attraction to Gordon Brown of PFI. There is a second attraction and that is the pro-corporate culture of ministers and advisers in the House of Commons, and no doubt in the House of Lords as well. It is interesting that Tony Blair's former health adviser, Simon Stephens, became president of the US company United Healthcare, Patricia Hewitt became adviser to Cinven, and Alan Milburn, Secretary of State for Health at one time, became adviser to Bridgepoint. There are a large number of cases. Baroness Kingsmill: Surely these are quite good ideas? Is it not quite sensible that there should be a movement of skills and talents between the public and private sector? It is a two-way process and each benefits from the other?
Q285 Chairman: We are straying from the questions.
Dr Edwards: It is not. I was giving two reasons why PFI was so attractive. One was because it was off-balance sheet debt and kept the public sector net debt below 40%, until the crisis, and, secondly, because of the pro-corporate culture and vested interests within ministers and advisers.
Q286 Baroness Hamwee: I was going to go straight to what is a sort of concluding question from what we have heard, which is, if not PFI, then what system of public sector procurement?
Dr Edwards: Public procurement.
Q287 Baroness Hamwee: Straight public procurement?
Dr Edwards: Yes.
Q288 Baroness Hamwee: With government providing capital in the way that it used to for the Health Service?
Dr Edwards: Yes. I see that as the most efficient way.
Q289 Lord Levene of Portsoken: If I may, we must challenge this idea that public sector procurement always works perfectly.
Dr Edwards: No, I did not say that, did I? I did not say it always worked perfectly. I am sorry, you need to be precise.
Q290 Lord Levene of Portsoken: I am being precise, if you listen for a moment-
Dr Edwards: Yes, but you said perfectly and I did not say that.