Q31 Jon Trickett: My understanding is that if we had used conventional public sector finance, it would have been in the ballpark of just above £30 million less than the private sector are charging us, but that is at present day prices. We then came back to ask you what the actual costs would be exceeded by between the two forms of funding. I think you gave us that figure as well. I just want to get that on the record, if you would not mind giving us that, please.
Mr Airey: Obviously the £33 million figure is a net present cost figure. We are dealing with cash flows going out 30 years from now, so the cash figures do not give you quite the right answer. It is a larger figure and I do not have it easily to hand. It is about £60 million.
Q32 Jon Trickett: Yes, £60 million was the figure I was given. It will cost more to finance through the PFI than it will to do through the public sector comparator, given all the equivocations which I do not want to spend time putting down. There are certainly some equivocations. I think it is in the order of £60 million additional cost and a £47 million figure which has been added as risk; maybe in the order of £100 million difference. On some of the matters, as I have just indicated by the discussions I had with the constructor, it seemed to me that the risk could actually have been defrayed in the way the private sector did. Had you considered that to a Member such as myself, it might well appear that the public sector comparator figure has been deliberately manipulated to make it appear higher than the PFI figure in order to justify you going out, perhaps for other reasons, to a private finance initiative? What would your comments be to me in relation to that matter?
Mr Gieve: It had occurred to me that you might think that, but it is not right. We have, the Treasury in particular, undertaken a large number of studies about the costs of doing public sector construction projects and the figures I have seen most recently, which were presented to this Committee, have shown that the average overrun has been 47% in capital cost and 17% in time. You are absolutely right that the PFI company, because it is a company not the government, has to pay a higher cost for finance than we do, but in return the reason for us going into private finance is that broadly we get a greater certainty on timing and cost overruns than we think we would with the public sector version.
Q33 Jon Trickett: I do not know how to achieve this, but could we get someone to provide us with a note as to whether the mechanisms on due diligence-and I have asked for this before and I have not received the information yet-which the private sector financiers use to secure certainty in the building projects might well be the same kind of tools which would be available to the public sector, thereby securing delivery on time and lower financing costs?
Sir John Bourn: I should be happy to provide that note and do it in consultation with the Treasury as well as with the Home Office in this particular case.3
Q34 Jon Cruddas: May I go back to one of the initial questions as regards staffing levels and the projections which have been worked on at different stages of the process? On reading the Report, as I understand it, in 1998 it was estimated that the head count, including the Prison Service, would be 3,200. That was revised down to 2,920. At the time, the head count for the new building was assumed to be 2,950 and that was revised up in the year 2000 to 3,450. So far that is correct. Between 1998 and 2003, the head count was revised up therefore from 2,950 to 4,900. Could you just give us a flavour of why there was such a dramatic increase in the staff of the Home Office?
Mr Gieve: Yes. Starting with the figure of 2,900, that was a projection at that stage which was based on estimates by Derek Lewis when he was head of the Prison Service, among others, that we would see a further reduction from an actual figure of around 3,500 at the end of 1997-98 to a figure first of 3,200 in 1998-99 and then on down to 2,900. In fact, as far as I can find, we never got as low as 3,200. We stuck around 3,500 at 1998. What has happened since then? There have been some changes in boundaries and we have been given some new tasks. If I might just run through the main increases, we have created a National Probation Service with a National Probation Directorate in the Home Office; that accounts for about 300 of the difference. We have created a trilateral criminal justice team working to three ministers: the Department for Constitutional Affairs, the Attorney General and the Home Office. It is in the Home Office and has about 150 people in it. The prison population has gone up and so has the headquarters, by about 150. We have taken in the Drug Co-ordination Directorate from the Cabinet Office; that is about 200. We have increased our numbers both on policing and crime reduction. The Home Office has been given specific targets to reduce crime and we did not have many people working on that, as opposed to policing, before 1998, so we have increased those numbers and also the numbers working on terrorism. Those are the big increases I can give you, but there has been an expansion.
Q35 Jon Cruddas: From 1998 you were anticipating that the building would accommodate some 2,950.
Mr Gieve: Yes.
Q36 Jon Cruddas: Then in the year 2000, the specification was renegotiated to hold an extra 500. Figure 5, page 15, talks about planned space per person in 2 Marsham Street, compared with other public sector benchmarks. I assume that this table is now on the basis of the anticipated population of 3,450. Have you got a figure for the density or person per square metre of the initial 2,950? Would that have exceeded these benchmarks rather than come under? What I am saying is that I want to get into how these changes have been made in terms of the extra 500, in terms of the density of the people in the building. The initial objective behind the new build was a better working environment. What are the implications here, given that the densities here are quite significantly under the benchmarks for MoD Main Building refurbishment and HQs in other sectors, the DTI and the like? What do you think are the implications, for example, for staff morale or the nature of the work environment here compared with how you initially envisaged it?
Mr Gieve: The answer to your first question is that it would be just over 17 square metres. So it was anyway below the MoD and some other headquarters buildings. Buildings like the MoD or the Treasury are very spacious buildings and cannot but be given the historic design. The answer to that I suppose is that they are more generous because of their historic design. At 15.5 square metres, we think the building will still offer a massive improvement in staff conditions compared with the buildings we are currently occupying.
Q37 Jon Cruddas: Do you have an estimate for what the present Home Office density would be, because it is notoriously cramped, is it not?
Mr Gieve: We are spread over quite a number of different buildings and they all have different square metres. May I send you a note on that?4 It is not just the space surround that matters, it is also the lighting, the atmosphere, whether it is hot when you want it to be hot and so on.
Q38 Jon Cruddas: Going back to the forecast in terms of employment levels in the Home Office, the actual growth exceeded the projected growth, or the decline you initially touched on, in both 2000 and 2001. Do you have a fixed projected head count for 2005?
Mr Gieve: No. We are currently working on a strategic plan for the whole Home Office group for five years. We hope to have that finished by the end of this year as the basis for our spending review bid. As part of that exercise, we are reviewing all our headquarters numbers, not just for the Lyons' review on relocation but also to see whether we can streamline the headquarters and shift more resource into the front line. I do not have a fixed projection. I would expect that to come down substantially, but I do not know by how much.
Q39 Jon Cruddas: In all of those three periods, the actual has exceeded the forecast quite dramatically. Do you anticipate any eventuality where you would have to get more people inside the new build in 2005 than the 3,450, which is 500 more than the initial estimate itself?
Mr Gieve: The capacity of the building at 3,450 is pretty fixed by the planning consents, as well as by the design of the building. I do not know about the margins around this, but I do not see us shoving more and more people in.5
Q40 Jim Sheridan: May I say at the outset that coming from Scotland I am a bit sensitive about lecturing anybody about new buildings, given that the Scottish Parliament was slightly over budget? May I draw your attention to paragraph 6, page 2, which says "The Home Office also identified other potential accommodation" but it was too expensive. Where was that accommodation?
Mr Gieve: We looked at a number of other central London locations, including a big site which is being developed off Victoria Street at the moment. We also looked at the possibility of moving to docklands.6
Ms Aldred: I do not have a complete list with me, but I could provide one.