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Below is the text of the speech made by Alan Milburn on 17th October 2013.

This State of the Nation Report was laid before Parliament this morning. The Commission on Social Mobility and Child Poverty is required by statute to report each year on what is happening on these issues in our country. This is our first annual report. I would like to place on record my thanks to my fellow Commissioners and our excellent Secretariat for their efforts in compiling this comprehensive survey of trends past and present and what we believe is likely to happen in future.

When Ministers created the Commission they explicitly asked us to hold their feet to the fire. I hope the report fulfils that remit in a way that is both authoritative and fair. Much of its focus is on what the UK Government and, to a lesser extent, those in Scotland and Wales are doing to tackle poverty and improve social mobility. We also look at schools and universities and the role that employers and professions, local councils and communities are playing. They are all players on the pitch when it comes to improving life chances. In future years our reports will subject each of them to greater scrutiny.

It is part of Britain’s DNA that everyone should have a fair chance in life. Yet compared to many other developed nations we have high levels of child poverty and low levels of social mobility. Over decades we have become a wealthier society but we have struggled to become a fairer one. When 2.3 million children are officially classified as poor it exacts a high social price. There is an economic price too in wasted potential and lower growth.

By definition, reducing poverty and increasing mobility is not easy. It requires a long-term effort. Some say it is an impossible task. The Commission does not succumb to that pessimism. We have seen enough evidence from around the world – and in our country’s own history – to know that with the right approach it is possible to break the transmission of disadvantage from one generation to the next. We have grounded much of our analysis and our recommendations in this global evidence.

We know these are challenging times in which to make progress. Britain faces a triple squeeze on economic growth, family incomes and public spending. In these circumstances it would have been all too easy for Government to abandon the aim of ending child poverty by 2020 and to avoid the long hard haul of making progress on social mobility. We believe the UK Government deserves credit for sticking to these commitments and making new ones. The test we apply in this Report, however, is not about good intentions. We take those as read. It is about whether the right actions are being taken. We find in our Report a mix of good and bad news.

On child poverty the UK has gone from having one of the highest levels in Europe to a rate near the average over the last 15 years. Since 2010 there has been a dramatic 15% decline in the number of children in workless households but recently there has been a big rise in the numbers of poor children measured as being in absolute poverty and in working poor families.

On employment we find that there are more people in work than ever before but that the numbers of young people unemployed for over two years is at a twenty-year high and the Government has been too slow to act.

On living standards we find that real wages were stagnating before the recession and have fallen by over 10% since 2009. Real median weekly earnings are now lower than they have been for over a decade, putting many more families under pressure and forcing many more low-income earners below the poverty line.

On public spending we find that some services, such as schools, have been relatively protected from cuts but that overall fiscal consolidation has been regressive with the bottom 20% making a bigger contribution than all but the top 20% and an inter-generational injustice which sees better-off pensioners protected but families with children bearing two-thirds of spending cuts.

On schools we welcome the Government’s energetic focus on reform to drive social mobility and find that the gap between the poorest and the rest has narrowed at primary school and GCSE but widened at A-level. The most deprived areas still have 30% fewer good schools and get fewer good teachers than the least deprived.

On moving people into work we welcome the big expansion in apprenticeships but not the decision to abolish the Educational Maintenance Allowance. We find that the Universal Credit could be transformative in encouraging more people into paid employment but its impact is weakened by high childcare costs.

On universities the worst fears about the negative impact of tuition fees have not been realized so far but big falls in applications from mature and part time students and the failure of top universities to diversify their social intake are causes for concern.

On the professions we find greater efforts to open doors to a wider pool of talent but new research for this Report finds that class is now a bigger barrier than gender to getting ahead in a top professional career. Senior professionals are still more likely to be privately schooled and privileged men.

There is much to welcome in what Government, employers, schools and universities are doing. We see considerable effort and a raft of initiatives underway. The question is whether the scale and depth of activity is enough to combat the headwinds that Britain faces if we are to move forward to become a low poverty, high mobility society. The conclusion we reach is that it is currently not. We conclude that the statutory goal of ending child poverty by 2020 will in all likelihood be missed by a considerable margin, perhaps by as many as 2 million children We challenge all political parties to say how they would make progress.

We conclude too that the economic recovery is unlikely to halt the trend of the last decade, where the top part of society prospers and the bottom part stagnates. If that happens social inequality will widen and the rungs of the social ladder will grow further apart. The promising reforms we see in schools and some aspects of welfare will not, on their own, offset the twin problems of high youth unemployment and falling living standards that are storing up trouble for the future. We see a danger that social mobility – having risen in the middle of the last century then flat-lined towards the end – could go into reverse in the first part of this century.

To avert this we believe that policy-makers need to come to terms with a new truth that emerges from the mass of evidence contained in our Report. Although entrenched poverty has to be a priority – and requires a specific policy agenda some of which the Government is pursuing – transient poverty, growing insecurity and stalling mobility are far more widespread than politicians, employers and educators have so far recognised.

Too often – in political discourse and media coverage – these issues are treated as marginal when in fact they are mainstream. Poverty touches almost half of Britain’s citizens at some point over a nine-year period and one third over four years. Today child poverty is overwhelmingly a problem facing working families, not the workless or the work-shy. Two-thirds of Britain’s poor children are now in families where an adult works. In three-quarters of those households someone already works full-time. The principal problem seems to be that those working parents simply do not earn enough to escape poverty.

Then there is the growing cohort of low and middle-income families squeezed between falling earnings and rising house prices, university fees and youth unemployment, who fear their children will be worse off than they have been. Many of today’s children face the prospect of having lower living standards than their parents when they grow up.

These are profound challenges. We believe, however, that they also present an opportunity: to make the pursuit of a society with less poverty and more mobility something that is relevant to the many not the few in Britain.

We find, for example, that there has been a change in the geography of educational inequality. London state schools, which used to be the worst in the country, are now among the best. 100 per cent of secondary pupils in Camden, Hackney and Tower Hamlets are now in good or outstanding state schools, but in Middle England places like Bournemouth and West Berkshire it is just over 50 per cent. The nature of the problem has changed – and so too must the policy response.

For decades the focus has been on moving people from welfare to work. With 2.5 million people still unemployed and appallingly high levels of youth unemployment renewed effort is still needed there. A job remains the best safeguard against being poor. But it is not a cure for poverty. Over the last decade earnings growth has been lagging behind prices. More and more people are at risk of poverty as a result. Today the UK has one of the highest rates of low pay in the developed world. Five million workers, mainly women, earn less than the Living Wage. These are the people that heed the urgings of politicians of all hues to do the right thing, to stand on their own two feet, to strive not shirk. Yet all too often the working poor are the forgotten people of Britain. They desperately need a new deal.

During the late 1990s and early 2000s, public spending through higher tax credits subsidized stagnating earnings and propped up living standards. Austerity removes that prop. The taxpayer alone can no longer afford to shoulder the burden of bridging the gap between earnings and prices. We conclude that Government will need to devise new ways of sharing that burden with employers in a way that is consistent with growing levels of employment. Making headway on reducing poverty and improving mobility requires a fresh settlement between what the state does, what the market does and what the citizen does.

Our key recommendations for Government are that it firstly, aims to end long-term youth unemployment by increasing learning and earning opportunities for young people who should be expected to take up those opportunities or face tougher benefit conditionality. Secondly, that it reduces in-work poverty by getting the Low Pay Commission to deliver a higher minimum wage, rewards employment support providers for the earnings people receive not just for finding them a job and reallocates Budget 2013 childcare funding from higher rate taxpayers to help those on Universal Credit meet more of their childcare costs. Thirdly, that it better resources careers services, pays the best teachers more to teach in the worst schools and helps low-attainers from average income families as well as low-income children to succeed in making it to the top, rather than aiming to simply get them off the bottom to succeed at school.

Next, employers will need to more actively step up to the plate. Our key recommendations are that, firstly, they will need to provide higher minimum levels of pay and better career prospects, enabled by higher skills. Secondly, we call on half of all firms to offer apprenticeships and work experience as part of a new effort to make it easier for those who aren’t going to university – “the other 50 per cent” – to pursue high quality vocational training. Thirdly, we call on the professions to to end unpaid internships and recruit from a broader cross-section of society than many do at present.

Finally, and perhaps most importantly, we say that every citizen who can should be expected actively to work their way out of poverty by seeking jobs, working enough hours and seizing the opportunities made available to them. We say that the key influencers on children’s life chances are not schools or governments or careers services. They are parents. And we urge Government to break one of the great taboos of public policy by doing far more to help parents to parent.

We recognise that these, alongside the other proposals we make in this Report, are very challenging recommendations. A far bigger national effort will be needed if progress is to be made on reducing poverty and improving mobility. That will require leadership at every level. Government cannot do it alone. But it does have a special role to play in setting the framework for policy and mobilizing the country to action.

To play that role effectively we believe Government will need to do more to embed social mobility considerations in its own processes. Currently, we see good intentions and initiatives undermined by too little clarity and coherence. We suggest that the Office of Budget Responsibility is charged with producing independent analyses of key government decisions to ensure that Ministers are getting the maximum mobility-enhancing, poverty-reducing bang for the buck.

Just as the UK government has focused on reducing the country’s financial deficit it now needs to redouble its efforts to reduce our country’s fairness deficit. If Britain is to avoid being a country where all too often birth determines fate we have to do far more to create more of a level playing field of opportunity. That has to become core business for our nation. We look to Government and others to make it happen.

Below is the text of the speech made by the then Health Secretary, Alan Milburn, to NHS Executives on 11th February 2003.

I would like to begin by thanking you for the leadership you show in the NHS. It has never been more vital.

In the months to come that leadership will be more important still. We are a critical juncture for the NHS. It is over two years since the NHS Plan was published. Investment in the NHS is rising fast. This April taxes will go up to pay for the extra resources.

As a result, capacity is growing. From the late 1970s to the mid 1990s only ten major new hospital developments were completed. Since 1997 13 have been built, seven more are under construction and a further 34 are in the pipeline. In each of the five years before 1997 the number of GPs in training fell. In each of the last five years they have risen. There are 10,000 more doctors, 40,000 more nurses, and 11,000 more therapists and scientists working in the NHS now than then. In primary care prescribing of cholesterol lowering drugs has doubled in 3 years. For decades acute and general beds in hospitals were cut back. For the last two years they have grown.

The local plans PCTs and NHS Trusts are concluding for the next three years will need to increase capacity further: in primary and community services, not just hospital services; in staffing, especially in doctor numbers; in new ways of working, not just the old ways of doing things.

Extra capacity is needed because the NHS is still working under very real pressure. It is tough out there. It is easy to lose sight of the fact that the journey we have begun is well underway. Of course, there is a long way to go but the momentum is now forwards.

Take waiting times. Thanks to your efforts waiting times – which had risen for decades – are falling – and doing so on virtually every indicator. In heart surgery, for example, the maximum waiting time which was eighteen months at this time last year will have been halved to nine months by April this year. So, in what remains of this financial year, it will be important to deliver the continued progress we have promised towards an NHS where waiting times are lower and quality is higher.

For patients, progress will be judged not just on whether waiting times are shorter but on whether their own experience of the service is better. There is no doubt that waiting – whether it is to see the family doctor or the hospital specialist – is the single biggest public concern about the NHS. But unless we can improve the quality of the patient experience we could end up hitting every target and ticking every box – and finding that the public believe the NHS is no better.

That is why the resources have got to lever in reforms. The investment cannot be used to ossify the system. It must be used to change it.

Last week I argued for devolving power and resources from Whitehall to the NHS frontline. The move to a more diverse, more devolved NHS will help make local services more responsive to the needs of the local communities they serve. Today I want to set out another crucial element of our reforms: greater choice for patients. I want to describe why I believe choice is important and how we plan to make it happen.

The starting point is this: when the NHS was created expectations were lower; deference was greater. Today it is the other way around. Some argue that in today’s consumer world the only way to get services that are responsive to individual needs is through the market mechanism of patients paying for their own treatment. I believe that is wrong and would fail. In a world where health care can do more but costs more than ever before, such an approach would make the best health care an exclusive club for only the very wealthy. The new possibilities brought by medical advance and – in our generation, the genetics revolution – make the case for an NHS where care is free and based on the scale of people’s needs, not the size of their wallets.

So public service values are right. But winning the argument for investment and reform means accepting that the era of one-size-fits-all public services is over. At the heart of public concerns about the NHS is the sense that its services are simply too indifferent to the needs of its patients. Staff and patients alike are up against a system that feels too much like the ration book days of the 1940s. Public confidence demands not just a change in structure but a change in culture too.

In our first term we tried to make services more responsive from the top down through service targets, inspection regimes and national standards. This national framework of standards is important to guarantee equity but in the period we are now in the transition is towards improvement being driven from below. Hence these three crucial elements of our reform programme:

Devolution – with Primary Care Trusts having the power to commission local services to meet the needs of local communities.

Democratisation – with NHS Foundation Trusts transferring ownership from a centralised state bureaucracy into the hands of local people.

Diversity – with different providers – public, private and voluntary – providing NHS services to NHS patients according to a common ethos, common standards and a common system of inspection.

These reforms make possible greater choices for patients. There are of course limits to choice in the health service, just as there are in any other service. For one thing, health care is often an emergency service. The last thing the patient in the back of the ambulance wants is to be asked to name their A&E of choice. They want the nearest, fastest service. And for another, patients do not just have a relationship with the NHS as consumers. They are also citizens who recognise that in A&E it is necessary for the less serious injuries to give priority to the more serious ones. In other words patients have both rights and responsibilities. Indeed I believe that as we strengthen rights and choices so we can demand more responsibility from patients – to use services appropriately and to treat staff respectfully.

But the NHS is a lot more than an emergency service. In fact, only one in three NHS hospital admissions are for emergency cases. Half are for routine, planned surgery where patient choice could play a role. A further one in seven are for maternity services where many mums and dads already exercise choice: between this hospital and that, between a midwife-delivered service and a doctor-delivered one, between a birth at home and one in hospital.

Indeed, it is precisely because women have been able to exercise choice for themselves that those services have become more sensitive to their needs. When we publish the new national service framework on children’s services later this year it will include proposals on how we can extend choice further in maternity care.

In other parts of the NHS patients also exercise choice. In primary care for example, most patients are able to choose their own family doctor. Between July and September last year almost quarter of a million patients, through their GPs, booked the time of their hospital appointment at their own convenience rather than the hospital’s.

No health care system, whether it is public or private, however, can provide unlimited choice. Most private health insurance schemes, for example, exclude maternity care and primary care as well as psychiatric and other long-term treatments.

But I believe we can open up more choices to NHS patients. The issue is firstly, whether we should and secondly, how we could.

Let me deal with the first of these issues. It is often argued that capacity constraints mean that choice on the NHS is not possible. It is certainly true that choice can only grow as capacity grows. What is not true is that some capacity is not already available or that more cannot be grown.

In London, for example, today the average waiting time for elective surgery in different hospitals varies between 10 weeks and 25 weeks. With the right incentives some hospitals would take on more work. When UCLH bought the London Heart Hospital from the private sector last year that doubled local heart surgery rates. In that area today only 40 patients are waiting more than one month for a heart operation, many for personal reasons. That hospital could easily take on more patients. There will be others elsewhere in the country which could do the same. Many more will be able to do so as extra resources produce extra capacity. So the capacity argument against more choice does not work.

The main argument against more choice has been that it will bring less equity. I want to argue the reverse: that greater choice can mean greater equity.

We do not start from a position where uniformity of provision in the NHS – with precious little choice for patients – has guaranteed equality of outcomes. In fifty years health inequalities have widened not narrowed. Too often even today the poorest services are in the poorest communities. Choice has only ever been available to those with the ability to pay. Those with the money have been able to exercise more choice – and buy faster, if not better, services as a result.

This institutionalised two-tier health care is anathema to those of us who believe care should be based on need and not ability to pay. The real inequity is to force the pensioner with modest savings who has worked hard all their lives and then needs a heart operation to choose between paying for treatment or waiting for treatment. That is a dilemma I want to solve.

We can do so by making choice more widely available on the NHS so that it is extended to the many not just the few. Some say poorer people do not want to exercise choice or are not able to do so. I disagree profoundly. That is patronising nonsense.

When I grew up on a County Durham council estate it didn’t much impress me that it was the council, not my family, who chose the colour of my front door. Perhaps unsurprisingly hundreds of thousands of council tenants opted out of council ownership when they had the chance to do so. The old-style, often paternalistic take-it-or-leave-it, like-it-or-lump-it relationship between council housing services and council tenants weakened public attachment to public services. Expanding choice can strengthen it.

And by linking the choices patients make to the resources hospitals receive – alongside the systems of standards, inspection and intervention we have put in place – we can provide real incentives to address under-performance in local NHS services. As we know poorer performance is often concentrated in poorer areas. Giving people the power to choose between services will drive standards up. In this way, greater choice can enhance equity, not diminish it.

The world has moved on from the days when Henry Ford said you could have any colour car as long as it was black. The Ford Motor Company is 100 years old this year. Today, Ford produce cars so that you can have any colour – including five different shades of black!

Of course, choice in public services is more complicated than choosing the colour of a new car but unless the NHS offers some choice to patients, more of them – at a time when personal disposable income continues to rise – will simply take their custom elsewhere. More will abandon collectively funded public services for privately paid-for services. In the mid-1950s only half a million people had private cover for health care. Today it is almost 7 million. Ironically, those who rail against choice in public services on the grounds that it is a market-based reform risk ending up strengthening private markets not weakening them.

The trap we must avoid, is that identified by Richard Titmuss four decades ago, of middle class people opting out so that public services become only for the poor and then end up being poor services. By strengthening the appeal of NHS provision across social classes, greater choice can enhance social cohesion not diminish it.

The question in my mind is not whether NHS patients should have more choice but how to make choices more widely available.

We have made a start. And again I want to thank you for the role you have played. Since July last year heart patients waiting more than 6 months for surgery have been offered the choice of early treatment at an alternative hospital – public or private – which has the capacity available to treat them. Over 1,700 out of 3,800 patients – almost half – decided to make that choice.

They are not the only patients to benefit. Since October last year patients in London waiting for a cataract operation have been able to go to another hospital for treatment if they have waited 6 months. Over two thirds have chosen to do so.

I now want to explain how we intend to build on these first pilot schemes. We want to extend choice to other geographical locations and other clinical specialities. In the next year around 100,000 extra patients will be able to choose in which hospital they are treated. The sites we have chosen include those where waiting times are longest and where electronic booking of hospital appointments is being tested.

First, from this summer all patients in London waiting more than 6 months for any form of elective surgery will be offered the choice of an alternative hospital.

Second, from July patients in West Yorkshire needing eye operations will be offered choice when they are referred to a hospital specialist by their GP. In Greater Manchester those needing orthopaedic, ENT and general surgery will also be offered choice if they have been waiting longer than 6 months.

Third, also from July, choice will be extended to patients, mainly older people, needing cataract operations in the south of England where waiting times are currently longest. Patients will be able to choose, initially from two and then normally from four hospitals, where to have their cataract operation. The aim is to cut waiting times to 6 months by 2004 and to 3 months by 2005. For cataract patients in the south, this means that the NHS Plan target will be achieved three years ahead of schedule.

Fourth, the lessons learned from these areas will inform the extension of choice across the whole of England’s health service. From summer 2004, as the Prime Minister announced recently, all patients waiting six months for any form of elective surgery will be able to choose at least one alternative hospital and normally four – public or private – for treatment.

Fifth, from December 2005, by when extra capacity will have come on stream, choice will be extended from those patients waiting longest for hospital treatment to all patients. They will be offered choice at the point the GP refers them to hospital. Patients needing elective surgery will be able to select from at least 4 or 5 different hospitals, again including both NHS and private sector providers. Millions of patients a year will benefit.

Sixth, as capacity grows further in the NHS so choice will grow. Beyond 2005 patients needing surgery will be able to choose more hospitals in which they can be treated.

And choice needs to be embedded across other parts of the NHS where it is appropriate to do so. In primary care, for example, pharmacists will help more patients manage their medicines. More drugs will be sold over the counter rather than needing a doctor’s prescription. NHS Direct will provide more advice and information to more patients. And more NHS Walk-in Centres will allow more patients the choice of where to be treated.

There need to be other changes too. In a busy mobile society patients should be able to register with a GP practice near where they work if that is more convenient for them. The published Framework Agreement for a new GPs contract also opens up the prospect of greater choice. Patients who have traditionally been referred to hospital for minor surgery or for outpatient consultations could be seen instead in their local health centre by a specialist GP.

These reforms are about embedding choice across the NHS – from primary care to hospital services. They will require changes in the way the NHS works.

Patients will need help to make informed choices. Knowledge is power. To make choice work, the NHS will need to provide reliable and relevant information to patients in a way people can understand.

In primary care, for example, PCTs will need to use the annual patient prospectus, they issue to all the households in their areas, to highlight where women patients are able to see a woman GP. I can also announce today that later this year we will publish local guides to maternity services so that mums and dads-to-be are better informed about the choices available to them.

More generally we intend to make available easily accessible information on hospital performance, quality and waiting times so that as capacity grows in the NHS patients are able to exercise greater choices. The job of GPs, nurses and other members of the primary care team will increasingly focus on helping navigate patients through the care system so that they can make the choice that best suits them.

To make choice work there has to be better IT across the whole of the NHS. The huge investment we are making in IT will support this extension of choice. Electronic booking of hospital appointments from the GP surgery will be a reality in all parts of the NHS by December 2005. There will be more information to compare hospitals not just on the internet but through NHS Direct and touchscreens in GP surgeries, pharmacies and other locations. We are also exploring experience from other countries. In Bologna for example, patients themselves, after they have been seen by their GP, can book their hospital appointment, not just through their family doctor or pharmacist, but through a specialist call centre. The system gives patients more direct control and relieves burdens on GPs.

Choice requires diversity in capacity. A new generation of DTCs will be providing care to 250,000 patients a year by 2005. Insulated from emergency work these will be able to concentrate on elective surgery and shorter waiting times. Some will be run by NHS providers. Others by private sector providers. In making their commissioning decisions PCTs will need to consider how best to use both existing and new private sector provision for the benefit of NHS patients. They will also need to consider how best to use voluntary sector providers. I can tell this conference that, following discussions with key voluntary health care providers, I am planning to draw up a concordat to extend the relationship between the NHS and the voluntary sector.

And choice will only work if there are the right incentives in the system. From this April we will begin to move to a new system of payment by results for NHS hospitals. Resources will follow the choices patients make so the hospitals which do more get more; those which do not, will not. We will put in more help for hospitals that are struggling to improve. And, alongside this external assistance, these new incentives will act as a spur to improvement. Over the next four years an increasing proportion of each hospital’s income will come as a result of the choices patients make. Choice in other words is not just about making patients feel good about the NHS. It is about giving the patient more power within the NHS.

All these changes will take time of course. Giving patients greater choice in the NHS requires a fundamental culture change in how the health service works. It will put patients in the driving seat – at the heart of the health service – and not before time. Patients will be able to choose hospitals rather than hospitals choosing patients. There will be more choice in primary care and in maternity care too. This is a world away from the 1940s take-it-or-leave-it top down service.

For too long, for too many, the choice has been to pay or wait. Mrs Thatcher talked about getting treatment at the hospital of her choosing, at the time of her choosing. Her choice though was to opt-out of the NHS altogether. Our choice is for the NHS but a reformed NHS.

An NHS where more can have that choice of time and place of treatment; where more can share in choices previously only enjoyed by the few who could afford to pay; where people choose to stay with the NHS not opt-out. An NHS which genuinely puts need before ability to pay. That is what our reforms are about. That is what we intend to deliver.

Below is the text of the speech made by the then Chief Secretary to the Treasury, Alan Milburn, to the PFI Transport Conference on 2nd February 1999.

Introduction

Thank you Adrian for your warm welcome. We have been very privileged to have Adrian Montague to head up the Treasury Taskforce on PFI. Under Adrian’s leadership the Taskforce has done a first class job – getting actively involved with projects on the ground and enabling progress where previously there was deadlock.

What I would like to do today is to outline the Government’s progress on PFI, the further plans for reform we have in mind and our wider commitment to developing and defining other forms of PPP.

Government’s progress with PFI

Indeed, since we came to office in May 1997, this Government has revitalised PFI so that today we can rightly say that it is a key tool in helping provide effective and good value public services. Since the election, we have signed £4 billion worth of PFI deals and we have got PFI working in sectors like health where it had not worked before. By the end of this year, we estimate private sector investment in PFI projects will account for around 14% of overall public sector investment. Accompanying this turnaround has been a tremendous upsurge in confidence both in the public and private sectors that PFI can deliver the goods. And we are now seeing its benefits spread to other parts of the public services such as our schools.

As Lord Whitty will explain later, transport is a sector that led the way in PFI. It’s worth remembering that it was John Prescott a decade ago who first proposed the sort of public private partnerships arrangements that are now delivering the goods in transport. Schemes on the stock range from those of national and indeed international significance such as the Chunnel high speed rail link to smaller schemes such as the Nottingham Express Transit where PFI is making possible an integrated public system within a busy urban area.

The Government is proud of our record on PFI. We have been able to get it moving for three reasons.

Firstly, because when we came to office we were prepared to take tough decisions. In my previous job as Minister for Health for example we had to prioritise a number of major new hospital projects in order to break the logjam that had been allowed to build up. Health service need now dictates which PFI projects get the go ahead. To date 25 new hospital developments have been given the green light as part of the biggest hospital building programme in the history of the NHS. Work on 9 is already under way. The challenge now in the NHS is to get PFI working in smaller scale projects in primary care, mental health and at the interface with social services.

The second reason we have made been able to make PFI work is because we have been prepared to take head on some of the logistical problems that bedevilled PFI in the past. As you know, one of our first actions was to appoint Malcolm Bates to review the PFI process. He did a great job in analysing problems and more importantly finding solutions. Since Malcolm reported we have fully implemented all of his recommendations.

We have also recognised the importance of getting the management of staff right when evaluating bids and contracts. Openness between bidders, trade unions and staff is an essential part of any well run procurement process. PFI should not be a secret process because it is about providing better services to the public. That is why we have published guidelines for the consultation of staff and other interested bodies.

The third and final reason why we have been able to rejuvenate PFI is because this government is committed to public private partnerships in general and PFI in particular. In the past, the dogma of the right insisted that the private sector should be the owner and provider of public services. And the left insisted this was all the responsibility of the state. The modern approach to public services rejects these arguments both of the old right and the old left.

In some areas, the private sector is best able to provide the services. In others, the public sector is in the best position. And in many cases the best way forward is through new partnerships between the public and the private sectors. Where each brings something to the table. Where we combine private sector enterprise experience with public service values. For this Government the key test is what works. We recognise that what the public want is better quality, more responsive public services. Quite rightly, they want their services to be both dependable and modern. Their concern – like the Government’s – is about outcomes not ownership.

This is where PFI fits in. One of the main drivers behind it is to give the public sector what the private sector has long expected to be the norm – modern, well-designed purpose-built buildings that maximise savings over the whole life of the project. Better designs means less wasted space, more efficient energy management, lower maintenance costs. It also means more savings that can then be reinvested in frontline services.

Take the example of the contract recently signed by Falkirk Council, involving the replacement of five schools. It has been enthusiastically received by teachers and pupils alike who all stand to benefit from a decent environment for education. It is also delivering a 15% saving over the life of the contract compared to conventional procurement.

So we are pioneering new ways of doing things. New partnerships between the public and private sectors. A new understanding that improved public services and better value for money go hand in hand. The Government is committed to investing in our key public services. From April this year there will be an extra £40 billion for health and education. But it is not something for nothing. It is money in exchange for modernisation. PPPs and PFI are one way we are pursuing our investment for reform agenda.

And we will go on doing so. We have come a long way in the last 21 months. We are proud of what we have achieved but we recognise that there is more to do to make PFI and PPPs more generally a genuine national success story.

First, then we will be taking action to make PFI deals easier to complete. We are now looking at how to streamline the process of putting a PFI deal together. There is little doubt that the similarities between many PFI deals means that both time and money could be saved by having more standard template contracts. We will publish a guidance paper on standard model clauses by the end of this month. And next month we will publish guidance on accounting treatment that will help determine the optimal level of risk transfer that will deliver value for money.

These are both important developments in PFI because they will improve the efficiency of procurement, reduce transaction costs and secure better value for money.

Bates II

Second though we will continue to improve, identify and develop new opportunities and partnerships with both the public and private sectors. As many of you will know, with the impending expiry of the Taskforce’s 2 year mandate this summer, we have asked Sir Malcolm Bates to take a second look at the PFI and public private partnerships more generally to see how the government could further improve our approach.

I am not able to speculate about the contents of Sir Malcolm’s report but I am looking forward to reading his report in a few weeks.

Looking beyond PFI

What I can say at this stage is that the Government is committed to taking forward a whole range of public private partnerships. That will of course include PFI but not to the exclusion of other forms of partnership. We are committed to making PFI work even better. But not all of our eggs will necessarily be in the PFI basket. Again for us what counts is what works.

One of the reasons we extended the terms of the second Bates review is that we want to develop PPPs further to exploit all commercial potential and spare capacity in public sector assets.

Because we are not wedded to a single model for financing arrangements, it means there are new opportunities opening up to enable us to modernise the infrastructure and improve the quality of public services. We need look no further than the Channel Tunnel Rail Link to see the benefits of our flexible approach. Here we are completing the fast rail links between London, Brussels and Paris by restructuring the deal so as to make it commercially viable.

Elsewhere in transport we are developing very different forms of PPP. In the case of London Underground and National Air Traffic Control, for example, we are restructuring public ownership. Here PPPs are allowing investment above and beyond what would be possible directly through Government. And so we can begin to tackle the legacy of under investment and inadequate maintenance in those organisations.

Elsewhere we are pursuing other public private partnerships that involve greater commercial freedom for services with a core public function. The Post Office and the Royal Mint are good examples.

Our Wider Markets Initiative takes a different approach still. It is looking at how we can make better use of the public sector’s great many under-utilised assets. Some assets are surplus – so it seems a nonsense to hold on to them. Other assets can’t be disposed of but are under-utilised. So we are looking at how we can use these assets to the benefit of both the private and public sectors. So for example, the private sector might take a lease, run it, and bring private sector work and services into it. Or make recreational use of Forestry Commission land. Or commercially exploit the intellectual property derived from defence research.

Each project is different. That reflects different problems and different motivations in very different settings. Improving the quality of public services. Getting value for money. Providing incentives for effective business management. Correcting under-investment. Sweating public assets. Optimising capital investment flow. This diversity calls for the development of new approaches to enable public and private to work together. The Government will be taking a lead in that process in the months ahead.

Conclusion

In developing and defining PPP models we will build on our success in getting PFI working. Ours will be a twin track approach. One, improving and extending the PFI. Over the next three years we expect that PFI deals will contribute £11 billion pounds worth of investment in our public services. And two, building on the reservoir of expertise that is growing by the day in both the public and private sectors in finding forms of PPP that best suit the specific needs of particular public services. Today’s conference will help build that capacity still further. I am sure you will find it productive. Thank you for listening.