No retreat on PFI, warns Brown

Gordon Brown was today delivering a blunt message to the unions that there would be no government retreat over the controversial private finance initiative and that the alternative of funding new schools and hospitals by "reckless borrowing" would risk the return of a privatising Tory government.

In an interview with the Guardian ahead of his speech in Blackpool, the Chancellor called on the party to "trust me" and stressed that the PFI was central to Labour's programme of modernisation for the public services.

"If we retreat from the PFI and still say that schools and hospitals have got to be built, we will end up with the old quick fixes and retreat into unsustainable borrowing. That I am not prepared to do," he said.

The Guardian said Mr Brown intended to use today's conference to face down the unions who have demanded a U-turn from the government on the PFI.

"We've got to have the strength to take the long-term view. We are going to take the right road. Past Labour governments were blown off course and faltered. We have a unique opportunity," he said in Washington at the annual meetings of the International Monetary Fund and World Bank.

"We have an economy built on stability and not stop-go, and there is an opportunity for investment in public services. This is not the time to throw it away."

The Chancellor's plea to delegates that, at its most basic, the issue was "a question of trust" was likely to fall on deaf ears at a conference that was expected to be highly charged.

Mr Brown also strongly rejected calls from Brussels for European Union member states to rein in their borrowing over the next four years.

The Chancellor said that he had no intention of complying with the demand made in Washington by Pedro Solbes, the European commissioner in charge of economic affairs, for member states to shave half a percentage point a year from their budget deficits, saying it would mean cuts in UK public spending rising from £5bn in the first year to £20bn by 2006.

In what is bound to be interpreted as signalling waning enthusiasm for the single currency, Mr Brown said: "I have announced my plans for the next four years and I am determined to stick to them. I don't think the British public want the European Commission to cut £5bn a year from spending, as is implied by these proposals.

"The British public has a clear idea that the schools and hospitals which are financed by our plans should go ahead. My plans are prudent."

Mr Brown was using his speech to the party conference to argue that the real dividing line in politics is not between Labour and the unions over the PFI but between the Government and the Conservatives over public services.

"We will continue to modernise the NHS built on the ethic of public service. We will reject plans becoming ever more explicit from the Tory party for privatised hospitals, vouchers and new charges. That would be inequitable and inefficient," he said.

Mr Brown later said setting up a wholesale review of PFI would only act to freeze the whole process.

"We've got to have the strength to take the long term decisions...we promised the British people we'd put schools and hospitals first," he said.

Reckless decisions would damage investment in the public services, he said, and the public would claim the Government had broken its election pledges.

Currently there were £14 billion worth of contracts in procurement which amounted to 60 hospitals and several hundred schools.

"I've got evidence that we are achieving value for money," Mr Brown told BBC Radio 4's Today programme.

The Chancellor said: "If we were to turn round to people in constituencies waiting for schools and hospitals and say to them 'we're not going to go ahead with them at the moment, we now have doubts in our policy, we've lost confidence in the PFI scheme as the motion at the conference suggests',

then people would say to us 'you're not honouring your election promise'.

"We will continue to put schools and hospitals first, as we said, and we will deliver our promise to the British people.

"It is about taking the long term view and not every time someone raises a point saying that the policy has got to be scrapped or alternatively taking some easy option and reckless borrowing that would damage the British economy and British people over the longer run.

"It would be quite wrong, particularly when I've got evidence that we are achieving value for money and when at the same time the whole purpose of PFI is to bind in private contractors so that they're responsible for delays, for overruns, for maintenance, it would be quite wrong to say to people in constituencies waiting for these schools we're not going to do it, we are going to go ahead."

Mr Brown told Today that 25 independent reports had been done by the National Audit Office and every major project was examined.

"We want to learn lessons from them, we're very happy to look at the details of PFI, but to set up a wholesale review would be the equivalent of setting up a Royal Commission and people wouldn't sign contracts, schools and hospitals could not be built, building workers could not be employed, and people would not see their promises for better schools and hospitals realised.

"It would be to freeze the process and that would not be the right thing to do."

The Chancellor added: "This system where the contractor is bound in is actually in the public interest and that is why we can refine it, we can improve it, we can look at all the details, but we have a responsibility to continue to build those hospitals.

"If I were to drop PFI then I would have to have additional year to year borrowing. That in my view would be reckless in the present circumstances, and so the alternative to the PFI is not that we build the hospitals in the old way with public borrowing at a very big level, the alternative is that we're not able to build the schools and hospitals at all.

"I listen and everybody wants to listen to what is said at the conference but we have got a duty to the people of this country.

"The idea that you come along to a conference and you agree on a quick fix, or a short term option or some easy course of action is not the way forward for a Labour Government that must be responsible to the British people as a whole."

But the general secretary of Britain's biggest public sector union, Amicus, said that the Government should hold an independent inquiry into PFI.

Derek Simpson said: "The crucial word here is an independent investigation.

"I think it's something that should appeal to people who are for PFI or against it, whether you're going to vindicate it or whether you're going to justify the criticisms."

PFI was not the only way of funding the public services and that was why an independent review was important.

"It's not a question of the defeat of the Government, it's a question of ensuring that PFI is administered properly," he told Today.

The cost of PFI was to "effectively mortgage our future".

"But what we're really paying for is the past, what we're paying for is the under-running, the underfunding, the underinvestment of the public services by the Tory government."

Business leaders also said PFI needed to be reformed.

George Cox, director general of the Institute of Directors, said: "I think the principle is good - it brings in investment and it brings in capability which we wouldn't have otherwise - but the process clearly needs an overhaul," he told Today.

"I might add not all of them go wrong from the public sector's point of view, I can think of some very good private finance projects... but I think we have to learn the lessons. Why do some succeed and others don't?

"It is a very expensive, big process and the management of the contracts varies enormously from area of the private sector to another.

"What you're doing here is trying to have a partnership, and that's very different to the old culture of the civil service and its contracting and purchasing."

Mr Cox denied that some Government departments were unco-operative but "some are much better at managing the contracts than others."

He added that PFI could succeed and that "if we want these extra schools, these extra hospitals, I don't see any other way of getting them."

John Gains, president of the Construction Confederation, said the system could be "much improved" and that the Government could look at other funding methods.

"As far as we in industry are concerned PFI is a good process, it can be much improved, but it does provide an opportunity for once for a fully integrated delivery between capital works and services, but indeed it's not the only way that the Government can let work and there are other ways, their best value programme, that could also deliver very good value for the public," he told Today.

PFI could be improved by shortening the time between bidding and awarding contracts.

Mr Gains denied that PFI was just a guaranteed profit stream for the private sector.

"That's far from a fair comment. You will recall, or the public will recall, the many public projects that have failed to meet time and cost targets over the years.

"PFI absolutely transfers that challenge to the private sector. To date the private sector is, I believe, delivering some excellent projects for use by the general public."

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