Q101 Mr Bacon: Mr Kingman perhaps; you are the one who likes net present value so much. How much of the £91 billion going forward in net present value terms is comprised by things that are not capital?
Mr Kingman: I do not have that number, but I would be very happy to send you a note.
Q102 Mr Bacon: The thing that interests me about this is that plainly there is a difference between adding up all the gas bills and electricity bills in the household going forward for the next 30 years and paying your mortgage. On the other hand, there is a difference between that on the one hand and a legal contractual obligation to pay money in the form of an annual unitary charge on the other. When, once you have paid the money, whether the PFI contractor then goes and spends it on paying bank interest to his bank or whether he spends it on the cleaner is in one sense another matter. You have to, and you have a contractual obligation, pay this money over and the Chancellor has to find it in the budget, as though it were the coupon on a gilt. It is no different in that sense, is it? It is money you have to find so it is not debt in the narrow sense of bank borrowings or a bond, but it is debt that you have to find and pay going forward.
Mr Kingman: Yes, that is correct.
Q103 Mr Bacon: Going back to the question of the additions or the changes to the public sector net borrowing requirement, when do you think there will be more news on that?
Mr Kingman: We have said that it is our intention to move to this new accounting standard for 2008- 2009, but what then happens is that auditors will need to study each project in each department under the new standard and that will in fact impact on the accounts that are published in the summer of 2009. How the ONS then interpret that data and how they incorporate that into the public finances and on what basis is a matter for the ONS and I do not know when they will do that.
Q104 Mr Bacon: But there will then be subsequent exchanges; once the ONS has opined, there will be subsequent exchanges between you and departments who come to you and say the ONS's ruling means that they could have a problem unless you, the Treasury, amend their budget in the following way. You would be giving them the capital in order to give it back to you, would you not, but presumably you would have to do that?
Mr Kingman: Yes, I would expect there to be exchanges between us and departments about those issues.
Q105 Mr Bacon: But what I have just described about potentially having to allow the department to have more money in order to make a capital charge payment that admittedly would go back to the Treasury is correct, is it not? I have basically got the right end of the stick.
Mr Kingman: What I would certainly say is that if there is a material change that impacts on departments' budgets and on their ability to resource PFI deals, then we will have to ensure that arrangements are in place which make it possible for those deals to be pursued because we have said that we support the pipeline of present deals.
Q106 Mr Bacon: Finally, on this question of the operational taskforce, I think it is very interesting. When did you say it was set up? March 2006? It is fascinating that you only set it up in March 2006, because here you have this very clever complicated thing called PFI that has been set up and evolved over 15 years and really pretty recently in this lifecycle of this thing, you think: "Right, let's set up a taskforce to give people advice on a structured basis". I would have thought, given how complicated it was, given that it relates to local authorities and to central government, given that it relates to everything from prisons to government buildings, to hospitals and schools, that there would very early on have been somebody, because after all the Treasury is full of very bright people, saying let us set up something that captures the information and spreads it around because there is so much learning to get from all of this. The fact that you did not, the fact that you only got round to it in March 2006, suggests that what I was indicating earlier about the fact that actually this is not that interesting, the really boring business of running a contract is really secondary to going out and doing deals. Is that not true?
Mr Kingman: The important point is that the operational taskforce was set up, there was a whole variety of things that were in place before that, not least setting up Partnerships UK itself, which occurred well before that. There had been numerous taskforces to hold departments' hands in various ways. This was, as it were, a successor body to some of those predecessor bodies.
Mr Stewart: Two examples. We have run a helpdesk ever since we started up. What we grew to realise is that a growing proportion of the helpdesk calls were to do with operational matters for example. You love the subject of re-financing: there was a re-financing taskforce which was set up before March 2006, well before March 2006 and that became part of the operational taskforce.
Q107 Nigel Griffiths: If Deloitte had a client who had a £30 million investment in some new building, do you think that they would advise the client to lend on it if they did not have a project manager?
Mr McKechnie: Probably not.
Chairman: That concludes our hearing. This is clearly a very serious issue. In 2006 over £180 million was spent on making changes to existing PFI contracts. This was a point we made on benchmarking last year, Mr Kingman, you will remember. Clearly these projects do need better resources to manage these value for money changes and I hope you feel that, as a result of this hearing, we are going to get more action from the Treasury and Partnerships UK. Thank you very much.