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Lord Fraser of Carmyllie: My Lords, I accept that the officially published figures show that the last quarter of last year and the first quarter of this year are not as satisfactory as we would like. However, over the past two years, which seems a more reasonable period to take, manufacturing investment has risen by some 12.5 per cent., including a rise of 14 per cent. in plant and machinery. Possibly more important than looking backwards is to look forwards. My understanding is that all major forecasters expect output to pick up in the second half of this year and to continue to rise next year. On that basis, I think there is good cause to anticipate that manufacturing industry will improve.

Lord Bruce of Donington: My Lords, going back not two years but to 1979, which is the period in office of Her Majesty's Government, does the Minister agree that manufacturing output has increased only marginally in total in that time? Is the Minister aware that the main trouble is import penetration into the United Kingdom of manufactured goods, largely from the European Community, with which we are in deficit--and very substantial deficit at that--coupled with government policies which have resulted in the decimation of large parts of British industry?

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Lord Fraser of Carmyllie: My Lords, what I will accept is that manufacturing productivity has grown faster in the United Kingdom than in any other G7 country since 1980. I am also aware that because Germany is our biggest market in the European Union and its economy is relatively static, it has been difficult to increase exports to that country. However, I am sure that the noble Lord and I can agree on at least one matter. As the United Kingdom is the only G7 country where non-wage manufacturing costs form a lower proportion of total labour costs than they did in 1980, it would be extremely undesirable to do anything within the European Union that added to those costs.

Lord Peston: My Lords, the Minister is entirely right in all that he says about causation. Nominal interest rates are lower although real interest rates are not; sterling has been devalued; wage costs are lower; and productivity has risen towards that of our competitors. What puzzles noble Lords is that, given all of those allegedly good circumstances, our manufacturing performance in aggregate is not very good. One can always take two years, one of which looks better than the other. However, anyone looking at the path of manufacturing over the past 10 years or so--especially that part owned by British citizens--cannot possibly be pleased with it. I believe that the whole point of the Question put by the noble Lord, Lord Ezra, is whether the Government are missing something. Is there anything more to be done? I agree with the noble Lord that it is a puzzle. But no one can regard the outcome as currently satisfactory.

Lord Fraser of Carmyllie: My Lords, I accept that in recent quarters some slightly puzzling details have emerged. For example, manufacturing employment has appeared to be going up at a time when output is going down. That has rather levelled out, but productivity has significantly improved. I believe that what I set out in my original Answer is the correct approach to a stable economic environment. I do not believe that we should be unnecessarily pessimistic. I understand that today the Chartered Institute of Purchasing and Supply Managers--whose figures are well respected--has indicated that last month output and new orders grew faster than they have done for over a year. Coupled with that, the CBI anticipates that output will rise over the next four months. That is the reason for my optimism.

Lord Harding of Petherton: My Lords, does my noble and learned friend agree that services have become much more important throughout the western industrial world and that the worry voiced in these exchanges is irrelevant? I believe that most economists would agree with what I say.

Lord Fraser of Carmyllie: My Lords, I do not accept that we should ignore manufacturing. I wish to see it continue to grow and improve as much as possible. But my noble friend is right. One would give a completely distorted picture of the British economy if one did not take into account the dramatic improvement in the supply of services in the United Kingdom. That

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has done a great deal to improve the performance of our economy. Indeed, the growth of our service sector is probably better than that of any other G7 country.

National Health Trusts: Major Contracts

2.52 p.m.

Lord Haskel asked Her Majesty's Government:

    How many major contracts have been signed between national health trusts and contractors since Royal Assent was signified to the National Health Service (Residual Liabilities) Act 1996.

The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, Royal Assent was given to this Act on 22nd May. No contracts worth more than £1 million have been signed since then. Information on private finance schemes worth under £1 million is not kept centrally.

Lord Haskel: My Lords, I thank the Minister for her rather disappointing reply. During the debate on the National Health Service (Residual Liabilities) Bill on 21st May of this year, the Minister said (at col. 785 of Hansard) that the Government had approved 54 private finance initiative projects worth more than half a billion pounds and that the reason for rushing the Bill through your Lordships' House was to unlock this work. Can the Minister tell the House what is holding up signature of these contracts?

Baroness Cumberlege: My Lords, I well recollect that debate. I also remember that the noble Lord said that to rush into taking on more liabilities in an area not fully understood would only end in tears. During that debate the noble Lord was anxious that the Government should not rush into these schemes but treat them with caution and weigh them up with discretion. We have done that. There are a number of schemes in the pipeline. There are now 57 schemes worth over £1 million, and we expect to sign several of them in the next few months.

Baroness Hayman: My Lords, can the Minister give the House an estimate of the costs incurred by the NHS on external consultancy and advice on potential PFI schemes? Is it correct that some of the major schemes have run up bills for legal and financial consultancy of several million pounds each without having reached signature? Is the noble Baroness aware that there is near desperation in some parts of the service about the seeming impossibility of getting much needed schemes under way because of the almost Kafka-esque complexity of the current PFI rules and their infinite ability to delay and absorb money without producing anything?

Baroness Cumberlege: My Lords, one of the tests of a PFI scheme is that it should give better value for money than conventional financing. Certainly, those schemes which have been completed indicate that the process has been very good value for money. I cite

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Havering Hospital where the savings on the entire scheme were 26 per cent. It improved the standard and quality of services and it guaranteed savings. It was considered to be a great success. Of all the schemes that have been completed, we have no knowledge of any that has not produced a better service than would have been produced using conventional finance. The tradition in the health service was that the building of a hospital took 20 years. Many of these hospitals have been built within five or six years.

Lord Strabolgi: My Lords, can the noble Baroness say how many contractors have withdrawn from schemes under the PFI? Is she aware that these include the Sheffield University and Royal London Hospital Trusts? What is the reason for this lack of confidence on the part of contractors?

Baroness Cumberlege: My Lords, if one has to test schemes, obviously some will not succeed. At the moment 22 have been completed and 12 are under way. We expect other major schemes to be signed within the next few months.

Baroness Jay of Paddington: My Lords, is it not a matter of concern that several major hospitals have been publicly promised by the Department of Health--for example, in Carlisle, Amersham, Norwich, Durham and various parts of the country--and the contracts appear to be in almost permanent suspension because of the hiatus in the private finance initiative? As my noble friends have reminded the Minister, the assumption was that this would be sorted out by the National Health Service (Residual Liabilities) Bill. If the finance is not forthcoming, how do the Government intend to meet the prospective hospital requirements and keep the promises that they have made about new hospitals?

Baroness Cumberlege: My Lords, one of the great successes of the private finance initiative is that £½ billion of extra funding has been attracted into capital programmes in the NHS. We accept that some of the initial time taken may be a little longer but, considering the project as a whole, the construction of a particular unit or new equipment such as a scanner takes less time. That is obvious because of the strong incentives in the private sector to complete on time and contain costs. The added advantage is that the risks are transferred to the private sector.

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