Q511 Lord Forsyth of Drumlean: On new roads, you are up for that, are you?
Ms Mingay: We would consider it.
Q512 Lord Forsyth of Drumlean: Is not one of the benefits of PFI as it is explained to us that you are able to transfer the risk. When you say you would consider it, what prevents you from letting contracts where it is not just about building the road but taking the risk and responsibility for that the function and the outcomes of the road?
Ms Mingay: It is back to the essential thing about risk transfer, making sure that you transfer risks that they can control and manage effectively. If in all the things they could contribute to that outcome they could manage those, then I suspect we would, but if some things are them and some things are a range of other external outputs, other things, then it might not be a value-for-money approach.
Q513 Lord Forsyth of Drumlean: Presumably on a given road you will have a view on what the likely number of accidents are per kilometre or mile.
Ms Mingay: I expect some of my colleagues might, yes.
Q514 Lord Forsyth of Drumlean: Why could you not have provision in a PFI contract that if that rate were to be reduced by a certain amount, there would be a financial reward? You would be able to work out what the cost-benefit analysis of that would be. Is it because you fear losing control of what happens to the road? What is the difficulty?
Ms Mingay: One of the aspects is that these are long-term contracts and maybe those things vary over a period of time and the mix of factors varies over time and therefore maybe it is quite hard to contractualise. When I look at the PFIs that we have done in transport, where we have been more successful is where we have worked with the private sector to isolate the risks that they can really manage well for us, and where we tend to be less successful is where we put things in the mix which they cannot and therefore they do not price sufficiently or they get an outcome which is not quite what we want it to be.
Q515 Baroness Hamwee: Mr Coates has mentioned KPIs (key performance indicators). Happily the world has moved on a bit, so that there is much more setting of performance indicators locally than imposed centrally. Would you encourage bidders for PFIs, either as part of the competition process or once they have the contract, to be consulting locally on what the performance indicators should be? It very much follows on Lord Forsyth's question. You cannot be a politician anywhere without hearing people say, "You have to wait for an accident before they will change that junction."
Mr Coates: My experience is that most NHS Trusts have themselves a very firm view how they want their hospital operated, and you have to remember that in NHS PFI the operation is that half of the hospital is a governmental NHS liability. Though what you say has sense to it, my hope is that as these contracts mature and relationships mature-and some of them are still very young-discussions will be held in real time about how you can make the contract run more effectively and more efficiently with what we want, rather than one that is based on the dogma of the contract. If these things are going to last 30 years, ultimately the contract can be put into a desk drawer somewhere and we can say, "How do we make it work for both of us, rather than continually referring to the contract all the time?"
Q516 Baroness Kingsmill: This is an extension of the discussion we have just been having, I suppose, with Lady Hamwee and Lord Forsyth. Do you think the private finance schemes could be extended to deliver public services; that is, to provide teachers? What would you think were the limitations that are economic and political to this? Perhaps we could try defence to start with this.
Mr Thompson: The vast majority of what we procure is not really suitable for private finance. It is equipment which could be used and is used in theatre and therefore it is not really suitable for the private finance deals.
Q517 Baroness Kingsmill: Does it always have to be equipment? Could it be services?
Mr Thompson: Yes, it could be. Of the 54 deals that we have done, one quarter are for property and the services that go with them, a quarter are for information systems and the services that go with them, so, yes, it is possible to do that, but as far as we are concerned we could continue on the provision of assets and the services that go with them in a support function but we cannot extend that much further into frontline areas of defence. But there are still further deals for us to do. We have two significant ones in the pipeline. Kate referred to one. The other one is the rationalisation of defence training estate and the provision of a single place for training and all the services that would run with that.
Q518 Baroness Kingsmill: Perhaps we could hear from education and health. Could the core services be delivered by PFI?
Mr Houten: As with defence, we would make a distinction between core and support services. Clearly there is a fundamental tenet that has been there for a long time, which is that people cannot make profit on the delivery of statutory secondary education. That would be a pretty fundamental barrier, it seems to me.
Q519 Baroness Kingsmill: A lot of people do make profit on the provision of education, do they not? In the private sector.
Mr Houten: In the private sector but not in the state education sector.
Q520 Baroness Kingsmill: You think it is a political distinction rather than an economic one. I am still trying to get to the bottom of why you think you cannot provide these services.
Mr Houten: Like defence, clearly if you want the private sector to deliver the services, you need to be able to establish the risk, you need to be able to define that and price that. In the delivery of education that is quite difficult. In the core delivery of education we have broad objectives that our schools want to achieve, not just on standards but on the safeguarding of people and broader wellbeing, and it seems to me it would be very difficult to put that within a contractual framework.