Down Kenneth Clarke may be, out he certainly isn't. The man who claims to have invented PFI is on bullish form and ready to take on contractors, civil servants, bankers – oh, and the Labour government, of course, for messing up his big idea.
"The kind of politician who will cross the road in order to get into a fight," is former foreign secretary Douglas Hurd's verdict on Kenneth Clarke. As one of the biggest hitters in John Major's embattled Cabinet, Clarke got into plenty of political fights in his time. Many of them were about the PFI, a policy that Labour ministers attacked in opposition but rely on now that they are in power. So, when Clarke uses an interview with Building to lay into the present government's use of PFI, it comes as no surprise. It's a bit of a shock, though, to hear him having a go at contractors, civil servants, lawyers, bankers, and former Cabinet colleague Norman Lamont.

"Michael Heseltine and I should take credit for the policy decision on PFI because we forced it on our colleagues," he says. "Norman was chancellor at the time, but he had been resisting it, which was why Treasury officials had done damn-all to put it into effect by the time I became chancellor. If he had carried on in office he would have said to us, 'The Treasury has looked at it and it turns out to be a useless idea'." Clarke says that, although the PFI policy was officially announced in November 1992, it only got going the following year, when he replaced Lamont: "My presence opened the way for those officials who were enthusiastic about it to deliver it."

Six years after the rout of the 1997 general election, Lamont, Hurd and many of their one-time Cabinet colleagues have retired to the House of Lords, the leather-couched Valhalla to which frontbench politicians are elevated after fighting their last battle. Not Clarke, though: he was runner-up in the Tory leadership contest in 1997, and again in 2001. So, after 18 years serving as a minister, he has spent the past six as a lowly opposition backbencher, and today he sits in a single-room office in Portcullis House that he shares with his secretary.

An overwhelming smell of tobacco hits you when you enter, and the only picture on the wall shows a belligerent-looking Churchill brandishing a cigar. Clarke sits at a round wooden table, and piles of papers are spread in front of him next to an ashtray full of cigar ash. He's reading a letter from a constituent who has access to a colour printer: certain words and phrases stand out in red. "He's clearly very angry," says Clarke, "the trouble is he's not sure what he's angry about."

Sweeping the papers aside, Clarke gets in another dig at his predecessor in the Treasury. "The adoption of PFI can be dated back to the arguments we had in the public spending round in the last year of Norman Lamont's chancellorship," he says. "Michael Heseltine and I felt very strongly that the government was in danger of falling back into the bad habit of every government since the war, of cutting capital expenditure whenever it had to exercise restraint." In 1992, public funds were depleted by the recession, and the age-old battle between the Treasury and the spending departments was particularly hard-fought. "Norman stormed out of a meeting of the relevant Cabinet committee because Michael and I were resisting his proposals so strongly," Clarke says. Eventually, a compromise was agreed, and part of the deal was that Lamont's next Budget would pave the way for the use of private finance in public investment.

As chancellor, Clarke says his previous experience at the Department of Health gave him the impetus to reform public sector procurement. "Every single health project ended up late and overbudget, and officials simply regarded this as traditional," he recalls. Either the PFI had many enemies from the start, or Clarke's mind slants towards paranoia. He says bankers and lawyers made negotiations very complex, and to make matters worse, "they were also waiting to see what would happen if a Labour government came in. Labour successfully kiboshed it when we were in by being totally hostile to the idea and threatening to revoke it." When Blair took over as leader of the opposition, Clarke says Labour's PFI policy switched from hostility to sitting on the fence: "Their policy was totally obscure, which didn't give any comfort to the people contemplating trying out PFI with us, so we didn't produce very much."

Contractors don't escape Clarke's sharp tongue. "Most contractors regarded the public sector as a soft touch, where you had a splendid opportunity to make lots of money on cost-plus contracts with very little risk," he says. "The building industry wanted a form of PFI where they didn't have to accept any risks." Of course, that's not what they got, as Laing found out when it lost £40m, and much of its reputation, on the National Physical Laboratory PFI. Soon afterwards the once great company was sold for £1. Clarke says: "If Laing went down because they underbid on a fixed-price contract, they paid the inevitable penalty. In the old days, taxpayers' money used to be thrown around like confetti after every construction contract and nobody was allowed to go bust. We were intent on stopping that."

Clarke does sympathise, though, with the slow pace and expense of bidding for PFIs. "Whitehall bureaucracy has taken over the bid process, and the complicated requirements are mainly designed to protect the interests of the civil service. You should not invite too many bidders, because that way you have people spending millions on contracts they're unlikely to win," he says. So he backs the government's decision to abandon the use of the PFI on projects worth less than £20m.

In the old days taxpayers’ money used to be thrown around like confetti after every construction contract and nobody was allowed to go bust. We were intent on stopping that

That, however, is the only good word Clarke does have for the government. "Your readers are constantly having the management of their contracts interfered with for political reasons. Labour gave in to the trade unions and stopped contractors entering into their own conditions of employment. There are constant pressures to build in inefficiency," he says.

This is the heart of Clarke's message: he invented PFI, and Labour messed it up. "PFI has gone wrong because the government have lost sight of the objective: better management, better quality and lower cost," he says. He even goes so far as charging Gordon Brown with the Enronesque crime of using PFI to make government debt disappear: "He just wants vast amounts of public spending that he doesn't have to declare on the balance sheet. The government's spending policies are totally irresponsible."

So how should it be done? "PFI should be a genuine transfer of risk and management of a contract to the private sector," says Clarke. "It should deliver a specified quality of service at a specified cost, and the people who've taken out the contract should be left to decide how best to deliver what the government has stipulated."

Then comes a startling insight into Clarke's continuing ambitions: "If I were in office again, I'd have to get to grips with how to produce a much more straightforward bidding process and contractual process." Clarke is 63 years old, and has been an MP since 1970. Hasn't he had enough? "I'd gladly go back into senior office if the party could get back," he says.

Personal effects

Who’s in your family? My wife and two very grown-up children. I never lie about my age, but I occasionally dissemble about theirs.

Was it useful to be in the Cambridge mafia? It’s true that under John Major, a lot of the Cabinet had been at Cambridge in the 1960s. Cambridge was a great preparation for a political career.

What’s it like representing a constituency in your native Nottingham? Some of my contemporaries from school can’t believe I’m their MP, because they remember me organising trainspotting trips when I was 12.

That’s a shocking revelation Yes, but I grew out of it at the appropriate age. By the way, can you plug my jazz programmes on Radio 4? They were postponed because of the Iraq war, so now they’re coming out in August …