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Westminster Hall

Thursday 11 July 2002

[Sir. Michael Lord in the Chair]

NHS (Private Sector)

[Relevant documents: The role of the private sector in the NHS—First Report from the Health Committee, Session 2001-02, HC308, and the Government's response thereto, CM 5567.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Heppell.]

2.30 pm

Mr. Deputy Speaker : Before I call the Chairman of the Select Committee on Health, I should inform the Committee that there is a minor misprint on the order of business. The report should be numbered HC308, not HC318.

Mr. David Hinchliffe (Wakefield): I am grateful for the opportunity to debate the Health Committee's report on the role of the private sector in the national health service. I begin my expressing my appreciation to the Government for providing us yesterday with a response to the report in advance of today's debate. I was heavily committed in Yorkshire yesterday and had a royal visit to my constituency this morning, so I have not had the opportunity to study the response in as much detail as I would normally do. I apologise for that.

The inquiry was announced in July 2001 and the Committee published its report on 15 May 2002. The background to the inquiry was "The NHS Plan", in which the Government spelt out their intention to place greater emphasis on the role of the independent sector. It stated:

The plan went on to explain that four essential tests would be applied to any proposed partnership with the private sector. They are: the interests of patients, consistency with local and national strategies for the health service, value for money, and consistency with public sector values, including the issue of equity.

Our inquiry sought to examine in detail the new relationship. We held eight evidence sessions with a wide range of witnesses, including NHS trusts, primary care trusts, unions, academics, private sector companies and providers of private health care. We also visited two of the first wave of completed private finance initiative hospitals, including the one in the constituency of my hon. Friend the Member for Carlisle (Mr. Martlew). We are grateful to them for arranging very interesting visits for the Committee. I want to express our thanks to all who helped with the inquiry, those who gave oral and written evidence and those who gave up their time to meet us. I also thank our advisers, who provided valuable technical expertise, and particularly our excellent, first-class Committee staff who, as usual, provided marvellous support.

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It is important to say that this is the first inquiry undertaken by the Committee since it was radically reconstituted after the general election. I pay tribute to my hon. Friends and colleagues on the Committee for their work over a lengthy period and the good-humoured debates that enabled us to come to our conclusions. The result is an important and well balanced critique of the current and future direction of the national health service.

The report consists of four main areas. The first covers the concordat, consultants' contracts and treatment overseas of United Kingdom citizens. The second covers the private finance initiative. The third covers local improvement finance trusts, the mechanism the Government are using to improve the primary care estate. The fourth covers public private partnerships, and we examined particularly the provision of pathology services.

I want to highlight the main conclusions of the report and particularly those that I believe to be of greatest importance. My colleagues on the Committee may select specific areas which they want to develop.

The concordat set out the parameters for the involvement of the private sector in NHS health provision. Its opening statement is:

That indicated a clear step change in the relationship and a fundamental shift in Government policy.

It is fair to say that my opposition to private medicine is well known. It is based on a belief that private medicine has consistently undermined the basic equity principle of the NHS since it began in 1948. Throughout the period of the concordat, I have expressed unease at the direction that the Government have chosen. That is an important point I should make at this stage. I have particular concerns about the relationship with the private sector.

Initially the concordat was going to focus on elective, critical and intermediate care with the aim of driving down winter pressures and waiting lists. The plan stressed that the concordat was not a short-term measure, but the beginning of a longer-term relationship. We examined the concordat to establish the extent of its use, the impact on waiting lists, its relationship with mainstream public provision and the long-term implications of its use. When the Secretary of State gave evidence to the Committee, he suggested that a shortage in capacity was the principal factor in deciding to use the private sector. We all understand the need to reduce waiting lists. I understand the argument for using spare capacity in the private sector in the short term to achieve that aim, even if I am personally unsympathetic to it.

Mr. David Tredinnick (Bosworth): I am most grateful to the hon. Gentleman, and I have read the excellent report with considerable care. Does he think that it is strange that the Government have decided to use only elective care in the private sector in some respects? They have made no effort as far as I can establish to make any use of the approximately 50,000 complementary practitioners who work largely in the private sector. Does he agree that it is a bit strange that they have

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gobbled up all the private sector beds without considering the acupuncturists, the herbal therapists or the homeopaths, many of whom are regulated by statute? Would he care to comment on that?

Mr. Hinchliffe : I pay tribute to the hon. Gentleman for his consistency and commitment to an issue in which he believes strongly. I am not so sure. There are obviously wider debates about the appropriateness of the sort of provision to which he refers. He makes a fair point: perhaps we do have too narrow a view of what is treatment in a wider context. I would accept that, and if my late, very good friend Audrey Wise were here, she would be passionately saying that we should spend more time considering the alternatives that the hon. Gentleman has suggested on many occasions.

To return to the issue of capacity, it is worth making the point that, although NHS bed occupancy is running at roughly 90 per cent., private sector occupancy levels are between 55 and 60 per cent. Obviously, direct comparisons between the capacity levels of the two sectors can be misleading. Our report notes that bed management is easier in the private sector due to an absence of emergency patients. Furthermore, we have to recognise that lower bed occupancy rates are integral to the running of private hospitals, so that they can offer the flexibility of operation times, which is the main incentive for going private. However, the most important difference is that acute hospitals in the private sector do not employ consultants.

Consultants buy theatre time from the hospitals, and the vast majority of those consultants also work for the NHS. Obviously, they cannot work in two places at once. Therefore, exploiting the excess capacity of private hospitals could have a detrimental effect on NHS capacity. The Medical Practitioners Union told us:

I asked the Secretary of State about a case I had come across where an elderly lady was waiting for many months for an elective operation and was referred under the concordat to a local private hospital. She then saw the same consultant at that private hospital that she had been waiting all those months to see in the NHS. That is inappropriate and illustrates the point that caused us concern on the Committee.

Although we saw no objection to using the private sector in the short term, our report concluded that in the long term, increased use of capacity in the private sector may cause a direct threat to NHS resources. Therefore, we have made a number of recommendations to clarify that activity. We would like to see the Government assess the impact of concordat activity on staff availability in the NHS. I regret the fact that, from my understanding of the response, at which I have briefly looked, the Government have rejected the idea of a separate assessment of the impact on staffing. We felt that that was a key area to be examined, and I should be interested to hear the Minister's comments on that point later.

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We argue that the Government should develop sufficient acute capacity in the NHS for it not to be reliant on the private sector. The Government response points to the likely impact on capacity of the new consultant contract. Perhaps the Minister will expand that point, because the new consultant contract was being drawn up and agreed before we concluded our inquiry. The Secretary of State gave some evidence on that when he came to talk to us about the NHS plan, but the contract had not been seen as evidence to the Committee while the inquiry was under way.

We also suggested that the Government undertake a cost-benefit analysis of reclaiming private beds in NHS hospitals instead of buying in operations from private hospitals. I welcome the Government's agreement that trusts should look at that point.

On equity of access, when we studied the concordat we were disturbed to find that take-up rates across the country differed markedly between areas that had available private sector capacity and those that did not. For example, whereas the concordat has commissioned 3,294 operations in the south-east, it has commissioned only 444 in the north-west. My hon. Friend the Member for Leigh (Andy Burnham) was particularly concerned about the way in which his area was not benefiting from the concordat arrangements.

The basic tenet behind the NHS is that there should be equal access for those with equal need. The uneven distribution of concordat activity appears to undermine that tenet. We therefore recommended against earmarking further money specifically for concordat activity. I welcome the Government's response, which gives a commitment to try

That is a positive response from our point of view.

We recommended that any additional money available should be used in the local circumstances for which it is best suited. In some cases, that could be the development of local NHS capacity. In that way, each trust or region could identify and tackle its most pressing needs in the way that it felt worked best for it. Such a recommendation is entirely consistent with the trend towards greater devolution of powers to trusts. It was put to me by consultants at Pinderfields hospital in my area that they would have made far better use of the concordat resources had they not been forced to use them in relation to the local private sector. They felt that there were other ways, better suited to their circumstances, for benefiting patients in my area.

We also looked at how the concordat was assessed for value for money. Even in areas where concordat money was seen to make a difference, we could not find out whether that money was, in fact, well spent. If public funds are to be used in the private sector, value for money needs to be demonstrated. Comparisons can be made with NHS reference costs, such as the cost to the NHS of an operation, but our evidence showed that those are subject to very wide variation, which undermines their use in judging value for money. We have, therefore, called on the Audit Commission urgently to review a representative sample of concordat activity to assess its value for money. We also recommended that the Department take immediate steps to improve the methodology underlying NHS reference costs so that they can eventually act as a

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meaningful benchmark. I would welcome it if the Minister could clarify the Government's position on that recommendation.

Our report considered the impact on waiting lists of NHS consultants who work part-time for the NHS and part-time in the private sector. According to the Department's figures, if those consultants worked exclusively for the NHS, that would yield an increase in capacity equivalent to 1,500 whole-time consultants. That would be a significant increase, but our report acknowledged the difficulties in enforcing a ban on consultants working in both sectors.

When the Secretary of State gave evidence to us on the delivery of the NHS plan, he explained, in answer to a question that I put, how the new consultant contract would yield 14 per cent. additional consultant time for NHS work. That represents progress, but still falls short of the original proposal that the contract should include a seven-year moratorium on private sector work, given that consultants will still be able to work for the private sector once they have completed their statutory working week for the NHS.

Under the concordat patients may now be treated in the private sector as NHS patients by NHS consultants. Consultants currently manage both their private and NHS waiting lists, and the way in which those lists are managed creates confusion and potential conflicts of interest. It is important to point out that in the last Parliament we looked at consultants' contracts and were given evidence of possible manipulation of waiting lists in the interests of the private practice of certain consultants.

In this inquiry we received evidence from one manager who said that there was resistance from consultants in her area to the use of the concordat for NHS patients because of the potential impact on their private practice. There is clearly concern about that area. We felt that structural reform was needed to ensure a greater degree of probity. As part of that reform we recommended that trust boards should publish the details of payments for NHS activity made to consultants working in the private sector. I regret the fact that the Government do not accept that because some members of the Committee have continuing concerns about potential conflicts of interest.

Mr. Simon Burns (West Chelmsford): Does the hon. Gentleman also accept that some members of the Committee welcome the Government's commitment?

Mr. Hinchliffe : That says something about the Government's commitment. I have strong feelings on the issue, having had cases referred to me in which there has been manipulation of waiting lists. The vast majority of consultants work very hard for the NHS and we ought to address the matter in a way which is open and above board. It is wrong for there to be suspicions against consultants where such suspicions are completely misplaced, which is why the Committee felt that it was better to have the matter in the open. I shall be interested in the Minister's response on why the Government did not feel able to go along with the recommendation.

The report highlights our concerns about the training of medical staff. The NHS funds doctors' training, but after a number of years those skills can be transferred to

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the private sector. The private sector, therefore, gains medical expertise without incurring training costs, which is unacceptable. The Department and the independent sector need to agree to share that burden. We, therefore, recommend that the Government consider imposing a levy on the independent sector towards the costs of training health professionals that includes first qualification. On reading the Government reply to our report I was surprised that they had not been persuaded on that point. Again, I should be interested in the Minister's explanation of that particular response.

On the issue of job plans for consultants, two years ago the Committee expressed its astonishment that every consultant did not have a job plan because that was Government policy. At the time they acknowledged that job planning was a "clear and compulsory activity" for consultants. We were, therefore, most unimpressed to find that the situation remains almost unchanged. I welcome the mandatory enforcement of job planning proposed under the new consultant contract, which is mentioned in their reply to our report.

We also touched on NHS treatment abroad. Although that may be a way to reduce pressure on waiting lists, our understanding is that it is likely to prove a fairly marginal activity. The report notes that initial patient reaction seemed to be encouraging and a recent British Medical Association survey found that patients were not against travelling further afield if that meant that they would be treated sooner. We gave that development a cautious welcome, but our report sought assurances from the Government that there were robust mechanisms to ensure that patient follow-up can take place successfully and that the Department was confident of its legal position in the event of adverse clinical incidents.

We spent a considerable amount of time thinking about the contentious issue of the private finance initiative. In its past two election manifestos the Labour party committed itself to continuing with PFI to pursue its health objectives. The result has been an unprecedented level of new hospital construction. At the time of our report, 64 major new hospitals had been approved and of those, eight are now complete and operational and a further 15 are under construction. However, we had to satisfy ourselves that PFI was the best route to take to deliver value for money and that it would not have an adverse effect on the local health economy. Central to the Government's use of PFI is whether it represents value for money. If it does, it will be used; if it does not, in theory, conventional funding will be provided, although a sizeable body of opinion disputed the availability of Treasury funds.

Value for money is assessed by comparing the costs of PFI and traditional funding. The only way to prove it with certainty is to build two identical hospitals, one with Treasury funding and one using PFI. As that is not possible, the PFI is tested against a hypothetical model, the public sector comparator. The model represents the full life cost of public provision of a hospital. An assessment is carried out of the value of the risks retained by the public sector in both cases. It became clear that demonstrating value for money is a particularly complex task. Our report notes that the transfer of risk is an art, not a science.

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On the surface, it appears sensible to transfer all the risk to the private sector under such a deal. However, that is counter-productive, as the premium charged for such risks may be too high. Furthermore, the private sector may not be able to manage the risks. Therefore, the risks of the project must be allocated on the basis of who is better equipped to manage them, whether the public or the private sector partner.

Sandra Gidley (Romsey): At present, the system seems to allow PFI partners to cherry-pick which risks they will take. Will the hon. Gentleman comment on that?

Mr. Hinchliffe : I will deal with that point in a moment. There is a feeling that the whole process is skewed in the interests of the private, not the public, sector. We felt that the risks should be allocated on the basis of who is better equipped to manage them. It is essential that optimal risk transfers take place with the private sector taking only the risks that it is equipped to manage. For that to happen, much greater transparency is needed.

The accountancy rules for PFI, which are imposed by the Treasury, use a net discount rate of 6 per cent. We received evidence that that figure gives an average value for money margin of only 1.7 per cent. in favour of PFI. Revising the figure downwards by 0.5 or 1 per cent. would tilt value for money in favour of traditionally procured projects. A Treasury official told us that although the Treasury was reviewing its accountancy rules and that the net discount rate might possibly be reduced, the balance between the two would not necessarily change. We felt it necessary to take a more cautious position. If the discount rate were revised downwards while still producing value for money in favour of PFI, we would want the National Audit Office to assess the process to ensure that the complex calculations were not being manipulated to the benefit of the PFI route. There seems to be a danger that a calculation that does not produce the right result is changed, rather than the policy.

It was interesting that the one thing that united all our witnesses during a fierce debate on the pros and cons of PFI was the need to address the Public Sector Comparator. The majority view was that its artificial nature undermined its credibility. We concluded that while comparing a PFI project using a PSC may prove that the PFI is value for money against an artificial comparison, it did not necessarily prove that it was value for money in absolute terms. Therefore, we recommended that the Department should refine the way in which the PSC was constructed. We also recommended that the National Audit Office should assess the PSC as a means to identify value for money and report swiftly to the Health Committee and the Public Accounts Committee.

After we published our report, Jeremy Coleman, the deputy comptroller of the National Audit Office, in an interview in the Financial Times questioned the PSC in its current form far more strongly than the Committee did in its report. He argued that some PSCs are "pseudo-scientific mumbo-jumbo" while others were "complete rubbish." In the light of Mr. Coleman's words, I believe

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that our recommendations are more pressing and that any NAO report on the PSC would make for interesting reading.

Much of the evidence that we received about PFI included complaints about the lack of access to information on projects and the lack of transparency during their development. One depressing element was the references to the lack of transparency in the whole process. PFI documentation is lengthy and impenetrable, which does little to inspire confidence in the process. The report cites two examples of that: the north Durham full business case occupies 145 pages and boasts accompanying documentation three and half inches thick; the full business case for Coventry Walsgrave hospital runs to some 17,000 pages. That is obviously an obstacle to objective scrutiny, particularly when many of those who want to scrutinise the documents may not be familiar with their format.

We acknowledge that there is an inherent tension between commercial confidentiality and openness, but in our view greater transparency is vital to publicly procured projects. We have, therefore, made a series of recommendations that should improve openness, one of which was that all PFI proposals should be required to include a financial summary in a stand-up format for all stages of the process and that PFI documentation should be made more accessible. The balance should be tilted in favour of openness. I welcome the fact that the Government have accepted the need for succinct executive summaries, but I am concerned about the lack of an explicit reference to the financial side. Will the Minister refer to that?

One of the main issues associated with PFI relates to the treatment of public sector workers directly affected by a PFI project. As part of such a project, members of ancillary staff are transferred from the public sector to the private company; they retain their NHS employment rights, but they cease to be public sector employees. Obviously, many employees are unhappy about that.

There are also concerns that staff transfers result in the creation of a multi-tier work force operating under varying pay and conditions. When I was in Carlisle, I was particularly interested in the comments of a ward sister who said that she is regularly sent on expensive team-building courses by her trust, but she has no team to lead because the key elements of the team have been split. The fact that her team had been broken up had a bearing on the ward sister's ability to do her job and manage her ward. One method of solving such a problem is to use the Department's retention of employment model, by which workers are managed by the private sector but remain in the public sector. That could be a way forward, so it is unfortunate that several witnesses said that pilot schemes for that model had stalled. I should be grateful to receive the Minister's assurance that pilot schemes are progressing and that their results will be published shortly.

We were impressed by the patient focus care model that we saw in Durham. It was a model of staff transfer that brought together NHS staff and contract staff on the wards under the management and leadership of the ward sister, who had the authority to organise all the contract staff as if they were NHS staff. Along with the retention of employment model, that offers obvious potential for an integrated work force.

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As I said earlier, we considered the longer-term implications of PFI deals. PFI will tie the NHS and trusts into long-term collaboration with the private sector, and the lengths of the contracts will normally run for around 30 years in the first instance. Several of our witnesses questioned the ramifications of locking trusts into lengthy contracts, considering the speed of advances in health provision. Although the implications of PFI on the health economy cannot yet be assessed, we sounded a note of caution. We concluded that PFI had the potential to inhibit long-term flexibility in the light of new technologies and changing patterns of care and that the Government needed to ensure that PFI contracts were sufficiently flexible to respond to changes in demand without major penalties to the NHS. As there is no evidence that analysis has taken place, we have asked the Department to assess the future structure of and requirements for health assets and to ensure that all future contracts—whether PFI or conventionally funded—are examined in that light. I am not sure that that has been fully understood from looking at the Government's response. The Committee's concern related to the pace of change in health and the impact on any form of future capital provision.

Mr. Tredinnick : Did the Committee have a chance to examine the issue of ward cleanliness in relation to PFI? There is obviously a serious problem of infection in wards because of the way in which they are cleaned at the moment.

Mr. Hinchliffe : I am well aware of that and have certainly seen some hospitals in which the PFI project was not a factor. However, the contracting out of services has had a major impact on standards. My hon. Friends may wish to comment on it, but I had no problem with cleanliness in the two hospitals that we visited.

Mr. Kelvin Hopkins (Luton, North): My hon. Friend might be interested to know that my local hospital, the Luton and Dunstable NHS trust hospital, has brought cleaning services back in-house. It could not get the hospital cleaned privately.

Mr. Hinchliffe : I am interested to hear that; it has happened in other hospitals.

I have spoken for nearly half an hour, so I shall draw my remarks to a conclusion to allow others to speak. The Committee devoted a small part of its report to PFI and the surrounding debate. We noted that even a cursory examination of the evidence showed that the debate had become polarised and that the climate was not always conducive to rational analysis. We all know that PFI is an emotive issue, which makes it even more important that we have a rational and objective debate. We concluded that the onus was on the Department to take the lead. If benefits are likely to arise from PFI, they must be clearly explained; and if not, that too must be acknowledged.

It is sad that the Committee should have became a victim of that polarised debate when five paragraphs out of 155 became the main items of interest in the national press. It is clear from the report that I moved the deletion of paragraphs 65 to 69. I did so for specific reasons. First, as Chairman, I do not have a vote unless

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a vote is tied, and I could not otherwise indicate my views on those paragraphs. Secondly, I profoundly disagreed with their content. The evidence of Professor Pollock in particular has been dissected and examined in the sort of detail that I have never seen happen with any other academic witness.

I am particularly concerned that those paragraphs are factually inaccurate, as well as being grossly unfair to the professor and her union. I would add that the origin of those paragraphs has been subject to considerable press speculation. Indeed, many journalists have suggested that they were tabled on behalf of the Government. I place it on the record that I strongly refute such suggestions. Although I disagree with the Member responsible, in every other way I have the greatest respect for someone who is a hard-working member of the Committee and who would not act in the way suggested.

Ms Julia Drown (South Swindon): My hon. Friend says that we have looked in more detail at that than at other evidence. Does he not agree that when we see things that seem wrong we should consider them in detail, and that if we see things that we believe cannot be justified, we should say so? He says that those paragraphs are inaccurate. Will he say what is inaccurate?

Mr. Hinchliffe : I went through those paragraphs in detail in Committee and I specifically addressed each of the paragraphs to which the amendments did not reflect an appropriate evaluation of the evidence. I do not believe that those paragraphs stand up to objective examination. I do not profess to be objective, because I feel strongly that the witness put forward credible evidence. I stand by what I said a moment ago—I have never seen an academic's evidence examined and dissected in such detail as was Professor Pollock's. My hon. Friend the Member for South Swindon (Ms Drown) and I agree on many things, but we differ on that subject. I could go into great detail on those paragraphs, but I have already spoken for half an hour and others may wish to speak.

Mr. Burns : The hon. Gentleman said that there had been press speculation that those paragraphs had been supplied by the Government. He said, "I refute that." I should be interested to hear what evidence he has to refute it. Has he spoken to Ministers? Has he spoken to the hon. Member for South Swindon (Ms Drown)? Has he investigated other ways of refuting it?

Mr. Hinchliffe : I have made it clear that it was put to me by numerous journalists that the paragraphs were moved on behalf of the Government. My response to each of those journalists was to say that I know the Committee member responsible well and I do not believe that she would take such a course of action. She feels strongly about the issue, as do I, but I have no doubt that she would not take such a step. I have a great deal of respect for her and her work as a member of the Committee.

Andy Burnham (Leigh): My hon. Friend referred to the fevered nature of the debate around PFI. Does he accept that some of the work of the unit that we are

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referring to has contributed to that debate? When we went to Carlisle, local people did not share the outrage that we had been led to believe they felt about the development of their new hospital. Was it not important to bring that out in the report?

Mr. Hinchliffe : Yes. It is a matter of record that my views of PFI have been affected by the process of the inquiry. I was impressed by the two buildings that we saw constructed through the PFI scheme. However, questions need to be asked about the PFI route—in particular about the impact on longer-term revenue costs in a given area, and on the wider health economy, especially if a scheme is to lock a local health economy in to a particular form of provision that will last for a long time, when that form of provision might well become grossly outdated. Those are the areas that should concern us.

In the whole debate, only one unit seems to be questioning the merits of PFI. That is an important role for it to play. In a democracy there should be people who question the direction that the Government are taking. It is wrong when people attempt to discredit the academics concerned—I am talking, not about my hon. Friend, but about others.

Ms Drown rose—

Mr. Hinchliffe : I have spoken for well over half an hour. My hon. Friends will have a chance to express their opinions. I shall refer to some other points in the report, then my colleagues can make their contributions.

I have not yet mentioned the LIFT—local improvement finance trust—schemes that we looked at. We accept that the current stock of GP premises needs to be reviewed. In certain areas it is in disrepair. Our witnesses from the NHS Alliance described the investment by GPs as "poor" and the BMA said that investment was "sorely needed". The Secretary of State has acknowledged that primary care in many parts of the country, particularly the poorest parts, is appalling.

To address those problems, the Government are introducing LIFT schemes. They are a form of public-private partnership in which investment, along with Department of Health money, will be used to build and maintain primary care facilities. The Department expects to attract up to £1 billion of investment by using LIFT schemes. They will be targeted at a substantial refurbishment or replacement of the premises of up to 3,000 family doctors by 2004 and the creation of some 500 one-stop primary care centres. The intention is that LIFT schemes will be targeted at the areas of greatest need, and the first six schemes reflect that aim.

While our report welcomed the aim of LIFT schemes, they remain untested. None of the first six schemes has been completed. For that reason, we took a cautious position. We should have preferred to see those six schemes assessed for value for money and service provision before LIFT was rolled out nationally, and we recommended that the Government undertake a rapid assessment of the first schemes. In the light of the many structural changes taking place across the health service,

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we recommended that LIFT schemes be considered in the context of integrated strategic planning of health care assets.

I apologise for the length of my contribution. I have tried to give a brief summary, albeit a subjective one, of a lengthy and complex report. Colleagues can put their own spin—[Interruption.]—or views when they are called.

To conclude, our report urges some caution and a proper evaluation of the relationship with the private sector and its impact on the NHS. Once again, I thank my colleagues for their support during our work. I hope that our report leads to steps forward on the issues about which we have expressed concern.

3.9 pm

Mr. David Amess (Southend, West): This is an extraordinary debate. No one could have imagined a debate about the role of the private sector in our national health service taking place after May 1997. The right hon. Member for Holborn and St. Pancras (Mr. Dobson) was Secretary of State at that time, and hon. Members well know that his views on the role of the private sector were somewhat different from those of the present occupant of that high office.

The Health Committee has 11 Members and we are quite different personalities. Indeed, in certain respects, we are an unholy alliance. We bring to our horseshoe table different areas of expertise and different opinions on health care. I pay tribute to our Chairman, who has never shied away from the fact that he hates the private sector. Indeed, he absolutely loathes and despises every aspect of private health care in this country. It is a brave hon. Gentleman who holds such views and then chairs a Committee that produces a report such as ours, to which I am proud to sign up. We cannot reveal the details of the discussions that took place as we concluded our report, but we had some interesting deliberations and you, Mr. Olner, will have enjoyed hearing parts of them during the contributions of the hon. Members for Wakefield (Mr. Hinchliffe) and for South Swindon (Ms Drown). That will have given you a flavour of our different opinions on the issues.

I genuinely believe that the Government do not have a well worked-up health policy and that they react to crisis—I call it crisis management. I am sure that the Minister will condemn the remarks that I am about to make, but our report—however one reads it—says thank goodness we have received support from the private sector. That is in stark contradiction to the way in which Labour Ministers used to speak. There have been several crises in the past five years. The crisis over waiting lists and, dare I say it, waiting times had a huge impact on our constituents. We all recall the Prime Minister going across to St. Thomas's hospital to make several announcements on health care at a press conference.

Our report recognises the fact that the Labour party has undergone a huge shift on private health care. Labour Members and Labour activists say that the Conservative party totally opposes the national health service and that it would privatise it if it were in government again. I will not waste time talking about the language that Labour Members use on the subject; I think that the Government are privatising our national

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health service by stealth. There is no time in our short debate for me to expand on that. I will do so at another point.

At one time, this Government sent people abroad for operations. If a Conservative Government had done such a thing, there would have been an outcry from those influenced by the Labour party, yet nothing has been said about it. I am proud to be a signatory to the wonderful report on the role of the private sector in the NHS.

Ms Drown : May I give the hon. Gentleman a little insight into the matter? The British public might trust the Labour Government with the NHS and believe that Labour is trying to make an NHS of which everyone can be proud and on which everyone can rely. However, they might not trust the Conservatives, whose action on the NHS served to undermine some of its principles. One probably would give one's credit card to one's best friend to look after, but one would not go up to a stranger in the street and ask them to look after it.

Mr. Amess : When I end my contribution, I shall remark on the trust of the British people in the Labour party on the health service. All that trust has gone.

I am delighted to serve on a Select Committee. Parliament has undoubtedly been ignored on many issues, but the work of our Select Committees is to be cherished and acknowledged by Her Majesty's Government. Recently, the Committee had an away day and there was some debate among its members as to how we judged the success of our work. We are all busy people and it is nonsense to think that we traipse along every Wednesday or Thursday, listen to hearings, hold private sittings, publish reports and that that is the end of the matter. The work of the House is at its best when we produce reports.

We do not expect the Government to sign up to every aspect of the report. I realise that the summer recess starts on 24 July and we do not come back until October, but on this issue I hope that we will soon find out not necessarily what the Government have accepted, but how they have reacted to the report in detail. The Minister knows that our recommendations are on pages 45 to 50, and I want to touch on some of them quickly.

Our recommendation (a) is that

All members of the Committee, whether they are pro or anti the private sector, thought that that was sensible, but that fact is hopeless unless we find out whether the Government agree.

The Minister of State, Department of Health (Mr. John Hutton) : I am most reluctant to interrupt the hon. Gentleman, but does he know that we published a response to the Committee's report?

Mr. Amess : I do.

Mr. Hutton : In it, we spell out the answer to the hon. Gentleman's questions.

Mr. Amess : Well, I am not entirely convinced that we saw the details. I hope that the Minister will allow me to expand a little further on the subject.

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When a Minister gave us evidence—I think that it was a Secretary of State—I became exercised about the way in which we produce reports and are given a response by the Government. I am delighted that the Government's response is one of the quickest that we have ever had to any report. I congratulate the Government on listening to our criticisms on that point.

I am interested in what happens after the Government's response. If the Minister has time, will he tell us whether there will be debates on the matter on the Floor of the House? Now that the Government embrace the private sector, we need to know how we can monitor whether that policy is successful. That is why I draw the Minister's attention to recommendation (a).

Recommendation (b) states:

I cannot see much detail on that point in the Government's response. Given that the trusts are bedding in and will do so much work in delivering better health care for the country, will the Minister tell us how Parliament might monitor the progress of the project in the four remaining years?

The recommendations go on to say that

Again, although the Government have replied, the scene is one that changes quickly. Will the Minister tell us how the Government intend to give the Committee feedback?

What most exercised me was the matter of consultants' contracts. I think that we were all present when we received representations from consultants on the issue. The rhetoric and original position have changed extraordinarily. Organisations that are in a better position to judge the matter than is any hon. Member are using the words "climb down". We can all talk tough in the hope that the general public remember tough talk, but I remember not only the tough talk but the outcomes. If interest groups are saying that the original position has changed, I should like to know how the system works in practice, although the Minister may not have time to give those details in the debate.

Our recommendations make it clear that some hon. Members were concerned about the issue of consultants' contracts. We all understand that issue of consultants' contracts, and no one better than the hon. Member for Wakefield, who wants the best possible health service for people. However, we are dealing with human beings and all their failings. If an army of people is saying that because of the changes there will be a reluctance to enter the profession or to work in this country, who will do the work in future? The Committee was entirely right to reflect on the position of consultants.

I was present at most of our deliberations on the private finance initiative. Some members of the Committee clearly understood every aspect of PFI, but I am not convinced that every Member of Parliament has a complete command of those issues. I am not even convinced that all of those giving presentations had a complete command of the issues involved in PFI. The subject is delicate, difficult and challenging.

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I am not being gutless, but I do not want to get involved in the differences between the hon. Members for Wakefield and for South Swindon. I was uncomfortable with some of the evidence, inasmuch as there did not seem to be the sort of balance that I would have hoped for.

I am always grateful for faxes and was pleased to receive a briefing from the Royal College of Nursing. I am privileged to be shadowing a nurse at Southend hospital tomorrow, as the nurses come on at the end of the night shift at 7 am. I shall probably be discussing the PFI initiative as we go round. The College has reflected on our deliberations and wants us to consider four points. It believes that there should be


All of that is worth reflecting on and the Minister and his brilliant officials will no doubt have time in future to do so. Finally, the college believes that

which was one of the main recommendations of our report.

I do not know whether the Independent Healthcare Association wrote to all hon. Members, but it saw an opportunity in this debate. It is a wonderful organisation that understands the political and ideological differences on this matter. Its health cash plans are inexpensive forms of health insurance, paying out benefits for a wide variety of treatments and making grants to members for stays in hospital or on the birth of child. Most hon. Members have many constituents who belong to it. The organisation simply wants to say to Ministers that, as the debate continues, it hopes that the Government will bear in mind the valuable role that its member organisations play in caring for the nation's health.

I end, as people breathe a sigh of relief, with the issue that prompted the hon. Member for South Swindon to stand up. She tried, I suppose, to smooth the way by taking on the great challenge of explaining how the Labour party used to view private health care and its position now. We all welcome sinners, and those who repent are welcomed with open arms. The people who I represent are not bothered—they have no hang-up whatsoever—about who provides their health care. They resent the fact that they have to pay for it, and if they are told that they have to wait for two years to get treatment on the national health service. They say, "David—we have worked hard and we don't have much money, but we are now having to fork out and use our savings to have an operation brought to a conclusion sooner than it would be on the NHS." They are not bothered whether the Government use the private sector.

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For goodness' sake, let us draw a line under the great divisions that there have been among the Conservatives, Labour and the Liberal Democrats—I cannot speak for the Independent party, but its leader is with us this afternoon. That would be wonderful. We could be united, because whether or not we want to use the private sector to help the NHS, all of us want the best possible health service for the people whom we represent.

If the Government act on some of the recommendations contained in the Select Committee report, it will undoubtedly result in a better health service for each and everyone of our constituents.

Several hon. Members rose—

Mr. Bill Olner (in the Chair): Order. Before I call the next speaker, I advise hon. Members that although I see no sinners here, I want to give the Minister and the main speakers from the two Opposition parties at least 50 minutes to wind up—not 50 minutes each, but 50 minutes between them. I know that a number of Back Benchers wish to speak, so I ask them to be positive in their contributions.

3.30 pm

Mr. Eric Martlew (Carlisle): I am a bit jealous of not being a member of the Select Committee. It was obviously an interesting Committee, and I always enjoy debating with the Chairman, as he is one of the few Labour Members who makes me look like a Blairite.

I am here today because the first PFI hospital was built in my constituency, and I had the bouquets for that as well as bearing the scars. That hospital had been cancelled five times by the previous Conservative Administration because of lack of money. I remind the hon. Member for Southend, West (Mr. Amess) that the Tories did not get one PFI hospital off the drawing board; they were a total failure in that respect.

In 1997, I asked the then Secretary of State for Health whether we could have a new hospital, and I was told that we could, but that no public sector money was available and it would have to be a PFI project. If other hon. Members had been faced with that choice, what would they have done? I accepted the PFI. It was built on time and on budget, and it was opened by the Prime Minister in June 2000.

The new hospital was needed because staff were operating on a split site. The consultants were working on one side and the maternity unit on another, and it was said that babies were dying as a result; the temporary buildings that were used for elderly people were built during the first world war. We had major problems. That is the background; that was why we wanted a new hospital, and that is why it was one of the hospitals built in the first phase of PFI.

I thank the Committee for coming to Carlisle and seeing the hospital. I know that many hon. Members were impressed by it. I hope that their journey on the west coast main line was as good as the visit to the hospital—but I doubt it. The new hospital has 442 beds. It was originally designed for 474 beds, but the number was reduced. It was said that that happened because day surgery was becoming more common and because of an agreement between the consultants and the trust

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management, but I believe that it was the result of financial pressure. The report says that people thought that it was because of PFI, but I do not believe that. The same financial pressures that had caused the hospital to be cancelled five times before were the cause: there was not enough money in the system.

Many operations are still being cancelled. In the Cumberland infirmary, 47 operations were cancelled in January and 27 in June, but only eight were cancelled in March. The idea that winter pressure caused the cancellations is not correct. We had a very mild winter, and the figures on bed blocking show that whereas in December 2001 36 beds were blocked every week, in July 2002 only 14 beds are being blocked. Although we are making great progress, with social services and the health authority working together, in reducing the number of beds blocked by people who should be somewhere else, there are still many cancellations. In Carlisle the real problem is a shortage not of acute beds but of sub-acute and intermediate care beds.

I worry that we shall not be able to tackle that problem. The new PFI hospitals show that the Government have accepted the need for more beds; they have said, I think, that 5,000 more beds are needed throughout the country. Unfortunately, as happens with the first of anything, the scheme brings mistakes as well as progress. Work must be done to put that right.

The primary care trust and the North Cumbria NHS trust in my constituency seem to be in a state of denial. I had a meeting recently with them, which was very polite, at which they said, "We don't need any more beds. If we do get any more, we'll fill them up." I could not see the logic of that argument. I think that some of the people now involved in that subject in my area were the same people who decided that we needed only 442 beds in the first instance. I really worry because the bed model says that we will need 75 more beds in five years' time, and a statistician who was employed said that we will need 79 beds in five years' time. The consultants say that they have the staff and the operating capacity, but cannot do the operations.

One solution that the trust has come up with is to put a modular ward as a temporary measure at the back of what I remind hon. Members is a brand new hospital. It is suggesting, in fact, that we add a portakabin, containing between 12 and 15 beds, to the first PFI hospital built in this country, which is still new. That has nothing to do with a shortage of acute beds; it is about waiting lists and getting numbers down, after which the ward will be taken away. I do not believe that if the project goes ahead, that ward will ever be taken away. As I said at the start of my speech, the temporary wards that were built at the Cumberland infirmary during the first world war were not knocked down until 2000.

I would like the PCT and the trust to come to me, admit that they have a shortage of beds and insufficient finance and ask me to go to discuss the matter with Ministers. We have no cottage hospital in Carlisle, although a premises called Durranhill house has come up for discussion. The trust was at one time considering taking it on as a cottage hospital, but has now decided not to do so.

Another opportunity is provided by the extension built to the Cumberland infirmary in the 1970s, which we call the tower block. I understand that it has about

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140 beds, operating theatres and intensive care facilities. The trust has applied for nearly £1 million to knock that building down—yet for £9 million we could renovate it. It could give us the sub-acute beds that we need and, in line with Government thinking, we could have a diagnostic and treatment centre, where routine operations could be carried out away from the problems associated with accident and emergency provision.

If someone had asked me whether I wanted that to be funded by PFI or traditionally, I would have said that I was not bothered. All I thought about was the fact that we needed that new unit. We have an excellent hospital, and I would not like to leave Members attending the debate today with the impression that we have a bad hospital. The new hospital is a credit to us, and the staff enjoy it. We give better quality care to our patients. However, it is the lack of beds that frustrates everyone. We will not get the full use out of that hospital, and the Government will not get the credit for it, until we tackle the shortage of beds in Carlisle.

With regard to PFI, I think that we are saying that the jury is out—and I am sure that the Chairman of the Select Committee would say that the jury is more than out. In the example in my area, PFI has worked with regard to the hospital, but we still have a chronic bed shortage that needs to be put right.

3.40 pm

Dr. Richard Taylor (Wyre Forest): May I first say how pleased I am to see the Minister in his place to respond to the debate, and also thank the Chairman of the Health Committee for welcoming me, as a complete tyro, to the functions of a Select Committee? Naturally, our Chairman has covered much of the ground, so I shall restrict myself to the part of the report that concentrates on the private finance initiative. I have to declare a paradoxical interest here, because were it not for the PFI, I do not think that I would have achieved this unique way of supplementing my pension—but although I am grateful to the PFI for that, I admit that I still oppose it.

First, I draw the Minister's attention to conclusion (q), which calls for a "rational and objective debate". I welcome the Government's reply, which rather to my surprise welcomes the call for this debate. That is rather in contrast to what the Secretary of State is quoted as saying in paragraph 96 of our report:

That to me rather implies blind acceptance of PFI as the only way of meeting a short-term political imperative, rather than a willingness to hold an open debate. I must refer briefly to beds because that issue is an absolute minefield, as I have discovered many times. The Government response agrees that there has been a lack or transparency about bed numbers. One of the difficulties is that there are so many definitions of bed numbers. I sometimes think that civil servants and health managers get confused about those definitions. Is a bed in a community hospital an acute bed or not? Is a bed in a five-day orthopaedic ward included in the list of general and acute beds? I welcome the national beds

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inquiry, and the Department of Health's promise to achieve transparency within the framework of that inquiry. I make a personal plea to the Minister: will he persuade the Department of Health to clarify bed definitions and have one set of definitions that it will always stick to?

Our Chairman drew attention to the risk transfer and the less than optimal ways of calculating that. He also drew attention to the public sector comparator. I would add another quote from the deputy comptroller of the National Audit Office. On top of what our Chairman told us, the deputy comptroller implied that the end result of negotiations and consideration of a PFI was always pretty clear:

Page 21 of the Government's response addresses our suggestion that there should be a realistic comparator, because the public sector comparator is sometimes unrealistic. We recommended that a comparison should sometimes be drawn with a do-nothing option, and I have to say that the writer of the response to that section confused the public sector comparator with the do-nothing option.

I should like the Minister to comment briefly on three paragraphs that were not highlighted. In paragraph 92, the Business Services Association representative asked us to recommend that the public sector comparator should become a real comparator. Another worry was expressed in paragraph 102:

Paragraph 110 refers to the fact that the annual charge is the first call on a trust's revenue before all other payments, which implies that cuts will have to be made elsewhere if a trust cannot meet those charges. I am not sure that the Government's response to conclusion (z) covers that point if all PFI facilities are not needed as the years go by.

I should like to turn as briefly as I can to the vexed paragraphs 65 to 69, to which the hon. Member for Wakefield (Mr. Hinchliffe) has already referred. Like him, I am not imputing motives to members of the Committee, because during the time that I have been a member of it I have learned to respect all the Committee's members. However, I feel that those paragraphs constitute an attack on the evidence of one academic unit. They are not borne out by other evidence, for which I know we have been asked, and I shall try to address that matter.

Paragraph 65 claims that University College London's Health Policy and Health Services Research unit has

It is well known that the unit, in particular Professor Pollock, objects to both capital charges and the PFI. To my mind that is not confusion, because she objects to both policies. Many of us in the NHS in the early 1990s objected passionately to the imposition of capital charges, which took money from the patient care budget and only appeared to put the NHS on a level playing field with the private sector. Many people objected to

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capital charges at that stage. Professor Pollock clearly objects to both capital charges and PFI. Question 393 of the evidence asked whether the problem was capital charges or PFI, to which Professor Pollock replied:

It could not be clearer that she thinks that there are two separate problems.

Ms Drown : Three questions later the Committee asked the unit whether it accepted the point that sometimes in the NHS it is good to spend more on capital and less on medical staff because the NHS gets a better service, which could be a reason for a PFI project being better value for money than an NHS scheme. The unit accepted that point provided that the money did not come from the revenue budget. How could one do anything other than that in the NHS? Is that not a confusion with capital charges?

If one looks at the piece of evidence that the unit sent in—

Mr. Bill Olner (in the Chair): Order. May I advise the hon. Lady that she is on my list of speakers?

Ms Drown : Yes, Mr. Olner, I am quite happy with that. As this is a debate, I might as well make the point—

Mr. Bill Olner (in the Chair): No, it is not a debate. The hon. Lady is making an intervention.

Dr. Taylor : I am coming to those points, if I get the chance.

The first of three points arising from paragraph 66 is that

I cannot find a reference to that in the transcript, and the parts that are presumably about the unit refer to checks of value for money after project completion rather than no checks at all.

My second point about paragraph 66 is the reference to

which she certainly made. She said that in answer to a loaded question, and in her answer to the person's question she said that in her opinion there was a huge new industry for accountants, lawyers and management consultants. I do not believe that someone should be condemned for one sentence taken out of context, or for holding an opinion that is contrary to one's own, especially if one is backed by parliamentary privilege. One may disagree but one may not condemn.

Mr. Hopkins : The hon. Gentleman will be interested to know that when I recently spoke to a lawyer who worked on rail privatisation, she told me that the Government gave out millions of pounds and poured money for rail privatisation into a black hole. Accountants and lawyers made vast sums from it, and they will make vast sums from PFI.

Dr. Taylor : I thank the hon. Gentleman for that helpful comment.

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The third point from paragraph 66 is that the

In fact, evidence to back it up was provided in appendix 27. The Committee can say that the evidence was not sufficient, but it cannot say that there was none.

Ms Drown : Would not the cheque be more open-ended with a publicly financed scheme, as the public sector would have to pay for anything that goes wrong? A privately financed scheme limits the risk, because risk has been transferred. In that sense, the cheque is more closed in a privately financed scheme than in a publicly financed scheme. That is what the Committee found.

Dr. Taylor : We have already covered the art as opposed to the science of risk transfer, and I do not wish to return to it.

I do not understand how paragraph 67 can be based on questions 395 and 396. In my opinion, all that Professor Pollock said was that if new investment generates extra capital costs in a hospital's annual operating budget, it should be properly funded. MRI scanners were a red herring. I do not believe that the inquiry was given any evidence about staff savings from MRI scanners. In the past, many advances have been expected to result in savings, but many have failed.

Paragraph 68 is simply an assertion that there is a lack of sound analysis. That is an opinion of the Committee that is not based on evidence. The Committee has condemned the unit for an antagonistic attitude. Is disagreement always antagonism? Is one condemned for disagreeing with government policy? That is what has led to the accusations of political influence.

I wish to give some evidence from my personal experience rather than from the inquiry. The unit prepared a report, free of charge, on the Worcester private finance initiative, which was followed not with constructive debate but with denials of its accuracy and attempts to denigrate its authors' work. Spin and confusion over bed numbers were prominent, and after a debate between Professor Pollock and health authority officials in the presence of the local medical committee, the committee wrote:

I feel strongly that the criticisms of the University College London unit are not based on evidence taken by the Committee. Whatever the motives of the supporters of those paragraphs, they fit nicely with the Department of Health's aim of silencing critics—but I am not impugning the members of the Committee, whom, as I have said, I thoroughly respect.

The paragraphs try to silence further criticism and punish severely—

Mr. Bill Olner (in the Chair): Order. Will the hon. Gentleman look towards winding up his comments now?

Dr. Taylor : Certainly, Mr. Olner.

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Dr. Doug Naysmith (Bristol, North-West): Will the hon. Gentleman give way?

Mr. Bill Olner (in the Chair): If the hon. Gentleman does so, his time will be extended a little.

Dr. Naysmith : Can the hon. Gentleman give an example of how any criticism has been silenced in any way whatever by anything that has happened?

Dr. Taylor : I do not have the details, although I can provide them after the debate. Two people's criticisms were reported anonymously because they would not give their names.

An academic who is too critical becomes labelled as a campaigner and is then accused of losing scientific objectivity. The paragraphs in question should be withdrawn, because I believe they damage both the Committee and the unit. I am delighted to have had the opportunity to make my feelings clear. I have today received some comments about a PFI-built magistrates court in my constituency, and they strengthen my worries about the PFI in future. It is only a matter of time—perhaps it will happen even within the lifetime of this Government—before Professor Pollock and her unit will be shown to have been right, and I would hate the Committee on which I serve to have backed the wrong horse.

3.57 pm

Ms Julia Drown (South Swindon): I share the view of most of those who have spoken that it is amazing how much agreement there is in the report, given the potentially controversial area we considered and the different starting points of many members of the Committee. We all accepted that, in the short term at least, using the private sector could make an impact on achieving what we all want—an improved NHS with emphasis on reducing waiting lists— and we all shared a disappointment that in the private sector there are few examples of good practice. Given the huge subject we examined, there are many positive aspects in the report.

I should like the Government to examine further a few points concerning the concordat. In paragraph 31, we stated that money should not be allocated for private sector providers only. That is clear and just. It cannot be justified to give money to areas with private sector facilities. Money should be given on the basis of need. This is not an area in which money could not be spent by other places without private sector hospitals. If any part of the NHS was asked whether it wanted money to help to reduce waiting lists or to improve another sector of its health care, it would say yes and that it could use the money well. The Government's response to that is encouraging, but not encouraging enough. It states that the Government are trying to focus as much money on primary care trusts as possible, allowing them to decide how to spend it, but want to retain the ability to put more money into private sector units only. I hope that the Minister will assure us that that will not happen.

Paragraph 46 of the report refers to the training levy. There is still a strong case for considering such a levy on private sector providers. I know that that is an old chestnut that the Committee keeps pursuing, but it is right to do so.

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Paragraph 39 mentions the use of reference costs to look for value for money. The Government response states:

It also suggests that larger volumes, more evenly spread across years, might produce better results. I hope that the Government retain—I think the response hinted that they might—the idea that spot purchasing does provide better value for money, and that it varies from area to area. When one considers that private sector hospitals were already functioning very well before the NHS arrived and gave them more work, there is a strong case for saying that the money that the NHS pays for procedures should not be much more than marginal. The more that that idea is pushed from the centre, the more we can strengthen the bargaining hand of those negotiating locally.

On concordat activity within PFI, the report stresses the costs of not proceeding. There is a cost not only to the individual as regards having to wait for better quality treatment, but to families, the wider society, business, social services and other government budgets, such as those for benefits. We need joined-up government so that when we examine the costs and benefits of measures taken in the health economy, we consider the impact on the whole of government. Perhaps if more building schemes were established, and action on waiting lists was taken more quickly—be it in the private or public sector—the cost to the Government could be reduced.

I want to concentrate on the more controversial areas because they offer more interesting debate. I hope that all hon. Members agree that there is nothing magic about the private sector. Sometimes the Government hint that private sector management can perform magic, or can do what public sector management cannot. That is not the case, and I was pleased recently when the Government emphasised more strongly the quality of public sector managers and their ability to deliver for the NHS and all public services. It is important to hang on to them because we rely on them to work throughout the country to deliver better services.

On the NHS, I hope that we have all gone beyond the "public good, private bad" idea, which has fuelled debate. I understand those people who are cautious of PFI because my initial reaction was to be incredibly suspicious, particularly in Tory times when I would not trust the Conservatives with the NHS or a PFI. However, even under the Tories, I accepted the argument that giving a private sector builder a cheque to build a hospital, with which he could then run away, is different from asking a private sector partner to build a hospital, cheques for which will be given in 30 instalments only if the hospital delivers. That changes the psychology of the transaction and can mean that a private sector company will build a hospital differently. I have seen that happen in Swindon: an engagement with our local trust means that more thought is going into the materials being used for the hospital—the builders are considering whether to use easy-to-clean materials and double insulation in the roof so that the hospital can save £250,000 over the lifetime of the

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contract. Those ideas are different and worthy of piloting. That did not happen during the Tory years, as we hinted at in the report.

Mr. Hinchliffe : Why does not my hon. Friend suggest that the advantages that she outlines could also be contained in a public sector scheme?

Ms Drown : Simply because a public sector scheme in which a building is paid for up front with one cheque offers no financial incentive to deliver over 30 years. An agreement with a company that states that it will get payment only if the hospital is delivered and properly maintained might ensure delivery. Dividing the finances over years might provide an incentive. We do not know whether that is the case, which is why, for lessons to be learned, PFI should be examined in the context of a pilot scheme.

As PFI is so new, the Government should be more wary of its schemes. We will clearly learn lessons from PFI schemes; we have already learned some. We learn lessons from public schemes all the time. So, the case for PFI is not proven, but nor has it been dismissed. It will become harder for each PFI to prove value for money because the cost of new work, such as that in Swindon where we are adding extra roof insulation, must be spread across the NHS, through publicly financed projects and PFI projects.

That calculation needs to be fed in each time because there will be diminishing gains for the private sector. Nevertheless, we should see whether this different way of using the private sector delivers more for patients and staff. The ultimate test is whether we are delivering something better for the population. By closing our minds to the idea, we might be saying no to something that could improve the NHS.

I turn now to the controversial paragraphs of the report, which we rightly examined in detail. If we hear warning bells that some of the analysis does not add up, and if we are to include in our report lots of quotes from a particular unit, giving that unit some authority, we need to say where the warning bells are ringing. Other hon. Members have already referred to the question whether the unit confuses capital charges and PFI—it does. When the unit was asked whether those were two distinct matters, it said that they were, but subsequently confused them again. In its evidence to the Committee, which is supposed to make the two issues clear, it says that there are two problems. Table 3 on page 358 of the appendices shows the cost of capital as a percentage of income, pre and post-PFI. The figures for the Swindon and Marlborough NHS trust, which I know best, are as follows: capital as a percentage of income, pre-PFI is 3.3 per cent.; capital as a percentage of projected income, post-PFI, is 14.3 per cent. Where is the column giving the cost due to capital charges from a new hospital? Where is the column showing the cost of capital charges if we do nothing? It is not there. All the difference between capital as a percentage of income pre-PFI and post-PFI is put down to PFI. That is simply not a good analysis because there would be an increase in capital as a percentage of all income if any building development went ahead. If we built exactly the same hospital as part of a publicly financed project, on the current estimate, it would cost a little bit more, so the percentage would be greater. If we did nothing, the cost would be somewhere in between.

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It is absolutely right that we should say when we see that things are wrong. We must get better reports from University College, London and from others. I am not denying that there are real issues to be considered in respect of PFI, but the evidence must be accurate and must stand up. At the moment, some of the analysis is lost because it does not stand up and the Government can rightly dismiss it. We need to deal with the relevant concerns about PFI, not spurious ones. My concern is that PFI raises fear in the population. As it is new, people are understandably wary of it.

Mr. Hopkins : I draw my hon. Friend's attention to the fact that an opinion poll suggests that 83 per cent. of the population are opposed to private companies being used in the health service. Is my hon. Friend saying that the public support it?

Ms Drown : I am saying that people's initial reaction is to be wary of it. We all have a real love of the NHS and want everything to be done publicly, but that is not how the NHS is run. Virtually every supplier to the NHS is a profit-making business.

Jim Dowd (Lewisham, West): If that is true, where on earth do people think that the drugs and pharmaceuticals used in the health service would come from? Or would that 83 per cent. of the population prefer people to go untreated?

Ms Drown : That is precisely the point. Almost every supplier to the NHS has a profit motive. There might be a problem of public understanding that we need to work on. There has always been a partnership. However, the worry might be partly fuelled by analysis that suggests that any PFI hospital will have to be paid for by staff savings. That is not what happens. New public sector schemes cost more. Perhaps one lesson to be learned from PFI is that while the NHS has always tried to scrimp and save and to build smaller hospitals, lots of PFI hospitals are big. This is about getting it right the first time round—we shall not know whether we have done so for another 25 years, but we need to consider the matter.

Mr. Burns : Does the hon. Lady accept that if her constituents were given the choice between having their operations next week in a private hospital, but paid for by the NHS free at the point of delivery, and waiting for nine months for the health service to do it, the vast majority would opt for the former?

Ms Drown : That is right. Some people in Swindon have used private hospitals and I have heard good reports of them. It should not always have to happen, but we need to be flexible. What matters to me is to deliver the best possible health care for my constituents, and if that means some of them going to the Ridgeway hospital, that is a good thing. We must not confuse the issues.

I mentioned the belief that a PFI scheme has to be paid for by staff savings and the fact that, for its new scheme, Swindon had to spend 14 per cent. of its income on capital charges. My hon. Friend the Member for Wakefield (Mr. Hinchliffe) will know that work by the unit on the Wakefield scheme has shown that the public

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sector option there will cost 13 per cent. That is higher than four of the PFI projects in the table. Where is the balance? We have to make sure that the right arguments are advanced.

The Committee was right to say that it is not inevitable that a PFI project will lead to a bed reduction. When I was working on this, I had a student attached to me—a Hansard scholar—who surveyed all chief executives and asked them to tell him their concerns about PFI, the benefits and the disadvantages. He received a good response and I thank the chief executives for that. Not one responded with a worry about beds, which had been a matter of concern to the Committee. One mentioned a real frustration about the huge confusion over PFI and the fact that people thought that it would lead to a reduction in beds. We have moved on a long way with the beds inquiry and I am pleased to see the Government's undertaking to be clear about bed numbers in future. We need to make sure that the debate is clear—the message from the survey of chief executives was that bed numbers should be agreed before we go on to the next stage.

I should like to pick up the point about the MRI scanners and staff savings. The issue was not put before the Committee as evidence of things that happen. It was simply used to illustrate that it is important for the NHS to accept that sometimes spending more on capital items and less on staff can deliver a better service. Unless that point is understood, we shall not be able to explain why sometimes building a bigger structure or having a private finance scheme that is bigger than a conventionally procured scheme might be better. It might be, for example, that in Swindon we get the right departments next to each other, whereas if we just stayed on site we would have 10 years of disruption and all the departments in the wrong places. That could be a gain. It could mean that we can deliver services with fewer staff. Having fewer staff might sound like a bad thing, but it could be a good thing if it meant better services for patients. That is why it is crucial to the debate.

In response to my hon. Friend the Member for Wakefield, University College, London is not the only unit providing analysis. Our report quoted the office of health economics. We want to get good analysis both from UCL and from elsewhere.

Finally, with regard to who wrote the report, it was leaked that I wrote the paragraphs and we have heard double-conspiracy theories. I am happy to say that I wrote them. The paragraphs concerned criticism of the Government. Would the Government really produce criticisms of themselves and put them into a report? Let us have more balance and look for a way forward that addresses the real concerns that surround PFI—the things that we have to watch. We should not let arguments that do not stand up stay with us. We were right as a Committee to address them and to say that they are wrong.

Several hon. Members rose—

Mr. Bill Olner (in the Chair): Order. I remind the four Members who are standing that, as I indicated earlier, I shall be asking the Opposition spokesmen to start summing up just before a quarter to 5. I leave the hon. Gentlemen to do the arithmetic: you have half an hour between you.

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4.15 pm

Mr. Kelvin Hopkins (Luton, North): It is a great pleasure to take part in this important debate. I congratulate my hon. Friend the Member for Wakefield (Mr. Hinchliffe) on his excellent presentation, and I strongly agree with him, although I might have gone rather further. Perhaps his moderate tone reflects the fact that he is taking a consensual approach and speaking on behalf of the Committee. He is a fine and strong defender of the NHS and he is concerned about its long-term future, as I am.

Before saying anything specific, I should note that I am associated with two health service trade unions—the GMB and Unison—but I am speaking on behalf of my constituents and myself.

In a previous debate on this issue I said that PFI was irrational nonsense, and nothing that I have heard or read since has changed my view. Indeed, I would go further and say it is dangerous, and I shall return to that. A Unison pamphlet published when the Conservatives introduced PFI—let us not forget that it was a Conservative idea—suggested that it was the beginning of the creeping privatisation of the NHS, and that huge sums would be taken out of the health service to satisfy the whims of private capital. I can see no argument against that view. Indeed, the financial press suggests that £30 billion in profit is to be made from the public services when privatisation really gets going. That money will have to come from somewhere, and it will come from the public purse.

We can see from the example of the USA the direction in which we are going. Health provision there is essentially private, and it consumes about twice the proportion of GDP that the British health service does. Yet it does not provide for all its citizens, and millions of Americans have no health care. The USA has a bloated, inefficient privatised health sector, and we are in danger of going in that direction.

Mr. Burns : I have listened carefully to the hon. Gentleman developing his argument, but is he seriously suggesting that the Government are moving towards privatising the health service?

Mr. Bill Olner (in the Chair): Before I call Mr. Kelvin Hopkins, I should remind him that any interventions will take up some of his seven and a half minutes.

Mr. Hopkins : Indeed, Mr. Olner. I am trying both to be as generous as possible and to ensure that points are covered.

The answer to the hon. Member for West Chelmsford (Mr. Burns) is that I am suggesting that we shall move towards privatisation of the health service if the Government full-bloodedly pursue PFI, but I hope that they will not. In their defence, I should say that the Chancellor made the strong and principled point that at the point of need, health care will be paid for out of the public purse. That is an absolute principle. We are talking about privatising not the payment for health services but their provision; that is what I am deeply concerned about. Privatised provision will cost a lot more because the private sector will require a large return on its services. The more it provides, the more profit we will have to fund and the more it will cost the

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public purse. I suggest that the private sector is looking to public services as a milch cow, to replace manufacturing, in which profit returns are not as great as they were. Public services are the future, and privatisation is seen as the way forward.

Let me give an example. My hon. Friend the Member for South Swindon (Ms Drown) may want to intervene on me here, but I gather from press reports that the hospital in Swindon cost £98 million to build and will require payments of £12 million a year for 30 years. At the same time, £74 million of Government money has had to be lobbed in to boost the project. Vast sums are therefore already being spent on hospitals.

A PFI hospital unit is being built in my constituency. The choice was either no extra unit or PFI, so the authorities took PFI. I am sure that it will be a fine building, but it will undoubtedly cost more. It has also taken a vast amount of management resources and trust capacity to get it built, and it costs much more than it would in the public sector.

Ms Drown : Despite the figures that are floated, some of the extra money that my hon. Friend said had been lobbed in was for equipment. It was decided that the new equipment would be better funded by the public sector; I would have thought that he would support that.

Mr. Bill Olner (in the Chair): Order.

Mr. Hopkins : I thank my hon. Friend for that information, but I suggest that what I have described will happen in time. Hospitals cannot be allowed to fail, so the Government and the public sector always bear the risk, and it cannot be transferred. Hospitals will say that they need extra money for more equipment and so on. Indeed, I suspect that as time goes by, hospitals will demand more and more money from the public sector—from the trusts and other bodies.

The real problem—I have cut a large portion of my speech to make this point, Mr. Olner—is that the Treasury does not want more public borrowing. It does not want the public sector borrowing requirement to rise. It wants to keep the PSBR low, and to achieve that it has to find the money elsewhere—from the private sector. However, public borrowing is extremely cheap. It has never been cheaper. Long-term interest rates are very low; they have fallen below those on the continent of Europe for the first time in ages. The Government have the scope to borrow on the long-term markets at an almost zero rate of interest.

Jim Dowd : Where would the Government get the money? Does anyone in the private sector make money out of Government borrowing?

Mr. Hopkins : I have many friends in the City, and they tell me that the City is gagging to lend money to the Government. They want more gilt-edged investments.

Jim Dowd : So they are making money?

Mr. Hopkins : The private sector is making money, but it wants to lend to the Government because Governments do not become bankrupt. Governments are a low-risk investment, and a long-term, genuine and

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guaranteed return can be made. The City has a shortage of Government borrowing. The problem is that the Treasury is trying to keep the PSBR down for other political reasons, but I shall not speculate on those.

If the Government wished to, they could borrow the money and build in the traditional way in the public sector more cheaply, which would save the public purse vast amounts of money. That extra money could be used to build more hospitals and provide more facilities, and we could then solve the real problem of British health, which is that we do not spend enough money on it. In Britain we spend 2 or 3 per cent. less on health than is spent in France, 4 or 5 per cent. less than is spent in Germany and probably 6 or 7 per cent. less than is spent by the bloated American private sector.

Our problem is one of resources. If we spent more on health, many of the problems would disappear—especially those mentioned by my hon. Friend the Member for Carlisle (Mr. Martlew). I am completely and wholly unconvinced by the PFI scheme. It is about global mega-politics, and it has nothing to do with the real interests of the people of Britain—either their health or their pockets.

4.23 pm

Mr. Gareth Thomas (Harrow, West): It is a pleasure to follow my hon. Friend the Member for Luton, North (Mr. Hopkins), whose passion on this topic I respect. However, I support continuing partnerships between the independent sector in its widest form and the national health service.

I shall highlight one example of positive collaboration between those two sectors that is presently under threat. I welcome the continued scrutiny of public partnerships; the Select Committee has done an excellent job. I want to focus on the Committee's first recommendation—independent assessment of the impact on the NHS of the activities of independent providers. I hope that if the Select Committee returns to the subject, it will take account of the impact of clinical research carried out in the independent sector.

I would be delighted if it were to take a look at the Mount Vernon hospital, which serves my constituency. Independent sector research organisations such as the Cancer Research Campaign's Gray cancer institute, the Paul Strickland scanner centre, the Marie Curie research wing, the Linda Jackson Macmillan centre and Sir Michael Sobell house have an extremely positive relationship with the excellent NHS cancer centre on the Mount Vernon site.

Sadly, that joint working across independent sector organisations and the NHS is threatened by the last, dying recommendation made by the NHS eastern region before it was abolished in April. It suggested that the cancer centre at Mount Vernon hospital should be moved off the site at some point. The key reason cited for shifting that excellent centre, and throwing into doubt all its important cancer services and research, was that Mount Vernon lacked a district general hospital. That is a key criterion that is suggested in the 1995 Calman-Hine report as necessary to improve the quality of cancer services.

Why does Mount Vernon not have a district general hospital on site? The key part of such a hospital—full-blown accident and emergency services—was shut in

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1996. That was an appalling decision by the then Government. Many of us knew at the time that it would come back to haunt us and affect the specialist services and the excellent independent sector research on the site.

The Gray laboratory—the key Cancer Research Campaign research site—opened in 1957, and quickly became renowned for its radiobiological research. The Paul Strickland scanner centre opened in 1985, and is another non-profit-making organisation in the independent sector. It facilitates research and provides a range of important services to NHS patients. Also on the site is Sir Michael Sobell house, an independent sector hospice that offers palliative care and helps with specialist support to the NHS cancer centre. The Cancer Research Campaign's tumour biology and radiation therapy group is also based in the cancer centre's research wing. It provides important advice and support to NHS services on the site.

The Gray laboratory has campaigned hard against the proposal made by the NHS eastern region. It highlighted to local people the fact that the region's report made no in-depth analysis of the cost to the Cancer Research Campaign of shifting its facility should the cancer centre move. The laboratory had been involved in a series of clinical initiatives at Mount Vernon with important implications for the NHS and the development of the treatment of cancer, which may be hugely important to us all.

The Mount Vernon cancer network will become a research network next year. In keeping with other such networks, it will receive special funding to support increased involvement in clinical trials. Clearly, its effectiveness would be under threat if the proposal from the NHS eastern region were accepted and implemented.

Concern has been expressed in my constituency since the proposal was made public, and people think that the future of the whole hospital is under threat. I am sure that all hon. Members will understand that. I hope that my right hon. Friend the Minister can confirm that there are no plans to close the hospital in its entirety, and that there will now be genuine consultation on the future of the cancer centre on that site, not least in view of its important research links with organisations in the independent sector such as the Cancer Research Campaign.

4.29 pm

Dr. Doug Naysmith (Bristol, North-West): I can assure you, Mr. Olner, that I have thrown away three pages of my speech, and I shall take no more than five minutes.

I shall comment on the suggestion made in some quarters that our report pulls its punches or has in some way been watered down. A couple of inferences of that sort have been made this afternoon, but I do not believe it to be the case. The view seems to have arisen because of the furore surrounding Professor Pollock's evidence, which we have already discussed, and the famous paragraphs 65 to 69. That has led to calls for the withdrawal of parts of the report, accusations of infringement of academic freedom, and much else.

I believe that the true explanation of the fuss lies elsewhere, however—with the Committee's failure to find any robust evidence for the theory that hospitals

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built under private finance initiatives inevitably end up with fewer beds than they should have. We heard from my hon. Friend the Member for Carlisle (Mr. Martlew) about the shortage of beds at his local hospital. In fact, the evidence that we gathered suggested that when hospitals of that generation were being planned, and the theory was at its height, other forces were at work to reduce bed numbers. Those forces have since been reversed, thank goodness. Many people accepted the theory, however, and used it as a strong plank against PFI schemes. To discover that it may not be true causes them difficulties, and bashing the report may be one way in which they can obscure those difficulties.

We heard from the hon. Member for Wyre Forest (Dr. Taylor) about the political debt that he owes personally to some criticisms of PFI. I wonder how much of that debt arises from criticisms about bed numbers in some of the hospitals with which he was involved being affected by PFI. There is little evidence for that theory.

Our investigation was serious and asked searching and important questions about the current and potential role of private sector organisations, finance and medicine in the national health service. Let us consider how different news organisations chose to emphasise different aspects of the report on its publication. The BBC "Today" programme focused on the dual role of consultants in the NHS and the private sector. BBC television and the Financial Times highlighted the fact that paying for patients to have private care to cut waiting lists might not represent value for money. The Bath Chronicle emphasised our call for more openness about NHS-private links, especially the need for information about contract prices. The Evening Standard emphasised our worry about the long-term effects of the concordat on the NHS. The Independent and the Daily Mail said that MPs were warning against seeking a quick cure, emphasising that short-term help involving the private sector must not prevent the NHS from developing more capacity in the long term. The Morning Star said, "Health watchdog airs doubts about value of PFI", while The Times and the Bristol Evening Post focused on our conclusion that PFI did not reduce bed numbers.

Lots of topics, and the two chapters on LIFT and pathology services, were hardly mentioned. Only The Guardian, and later The Daily Telegraph, concentrated on the strange tale of how the Chair of our Committee

It is a great pity that the press focused on that story, as it suppressed many of the good things in the report.

The report contains several criticisms of the Government's involvement with the private sector, almost all of them signed up to by the Committee without votes needing to be taken. The Committee made 32 recommendations, of which the Government fully accept 14 and reject three outright. Of the remaining 15, they say that they partially accept our view, or are already doing, or plan to do, something similar to our recommendation. Although monitoring must be carried out to ensure that some of the partially or conditionally accepted recommendations become

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reality, I do not consider that a bad score. I hope that our Committee will play a part in ensuring that those actions are taken, and I shall listen for further assurances from the Minister.

4.34 pm

Jim Dowd (Lewisham, West): I have a few more moments than I was expecting, but I promise not to misuse them. First, I am delighted to speak on the report that the Committee of which I am privileged and pleased to be a member has presented today. The report is unanimous, although it is obvious, to paraphrase George Orwell, that some parts are more unanimous than others.

We took on an ambitious remit. The hon. Member for Southend, West (Mr. Amess), who is sadly not here at the moment, said that we investigated private health care, but we did not. The report's title is deliberately specific—it refers to the role of the private sector in the national health service. My hon. Friend the Member for Bristol, North-West (Dr. Naysmith), who was admirably succinct, summed up the generality of the report. The issues surrounding PFI and a couple of paragraphs in that commentary have attracted a disproportionate amount of attention, which has detracted to some degree, although I hope not lastingly, from the body of work that we have put before the House.

The role of the private sector in the NHS, despite what others may say, is, as the report sets out, as old as the service itself. I felt that my colleagues on the Committee and I were taking part in a serious analysis of certain private sector activities relating to health care provision. We did not examine, for example, the private sector's role in running the acute sector and the provision of services, drugs or pharmaceuticals, or the other support services that it provides to one of our premier national public services. The report is not definitive in terms of the private sector's entire role, but we considered those areas in which private sector involvement has grown and changed in recent times.

I am forgetting my manners. I must congratulate the Chairman of the Committee, my hon. Friend the Member for Wakefield (Mr. Hinchliffe), on the almost universal good humour with which he managed sessions that were sometimes very tendentious and contentious. I also pay tribute to the assiduous work of the Committee staff who supported us.

The PFI has attracted the most concern, although what the Committee suggests is what everybody really knows in their bones—PFI is not an entity, but a process that can be well or badly managed. One of our recommendations relates to the need to maintain a consistent corpus of management skill and to ensure its availability to all those who are embarking on PFI processes in the health service and elsewhere. PFI is not simply restricted to health service capital provision.

One of the reasons that I brought such enthusiasm to the inquiry is that, during my years on Lewisham and North Southwark district health authority and something called Lambeth, Southwark and Lewisham area health authority (teaching), I saw a lot of public money being simply thrown down the drain because of how traditional capital projects were managed in the NHS. I will not bore the Chamber with stories of Guy's

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phase 3, as I am sure the Minister is well aware of it. That scheme is 300 per cent. over budget and still unfinished many years after it was supposed to be.

There are other stories from our part of south London, including that of the Jubilee line extension, which was £1.5 billion over budget and two years late. I am fairly sure that had it not been for the imperative of the dome—good or ill, however one judges it—the project would probably not be finished yet. Billions more of public money would simply have been wasted.

I am happy to argue with my hon. Friend the Member for Luton, North (Mr. Hopkins) about comparative marginal interest rates on borrowing, but I am not prepared to borrow money at 6 per cent. and just pour it down the drain. I want to ensure that that public money is spent to best public effect. All public services are fundamentally an alliance between three parties: the producers, the users—patients in the health service example—and the taxpayers. In our examination, we took evidence equally and representatively from all three, but it is often more difficult to estimate where the interests of that last group, the taxpayers who pay for the service, best lie.

I would like a different public procurement system that protects the interests of taxpayers in a way that has not happened previously and which is not so prone to incompetence and waste. Of the many PFI matters that the report assesses, the most difficult to calculate is the value of intangibles such as risk transfer, value for money and long-term facilities management. Nearly all those who have spoken in the debate, and others like them, have said, in effect, "There is a PFI hospital in my constituency. I don't like or want it, but if it weren't for that, we wouldn't have a new hospital at all." There is a calculation to bear in mind: what price does one put on giving treatment to people on the one hand, and denying it to them on the other? [Interruption.] I see you signalling to me, Mr. Olner.

Mr. Bill Olner (in the Chair): One last go.

Mr. Dowd : I shall move on to my semi-last point.

Our recommendation on pay beds, which is extremely mild, clearly so confused the Department that it managed to respond out of order in the document, putting (d) before (c). There is more that we can do on that. If we have private health care provision on NHS premises and buy in private health care on the ground that there is spare capacity in other parts of the health care community, we really should consider how to rationalise those things.

One of the issues that complicates PFI is the unfolding policies of NHS Estates. I draw attention to a recent decision that all new schemes must include 50 per cent. individual rooms. I say to the Minister that that will cause havoc in the next waves of PFI and the broader capital programme as well as in recalculating the number of beds that are affordable in the short term and, more particularly, in the long term. There will be questions of primary care trust affordability in the long run. Will he respond on that?

There is plenty more that I could say, Mr. Olner, but you will be pleased to know that I shall not say it.

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4.42 pm

Sandra Gidley (Romsey): As a new member of the Select Committee, this is the first inquiry in which I have been involved. The process has been an eye-opener. I start by congratulating the hon. Member for Wakefield (Mr. Hinchliffe), the Chairman of the Committee. He had a difficult job, because it was clear from the outset that there is a wide range of opinions on the issue.

Some of us started with a very negative view of PFI, but my opinion has shifted. Although I am still sceptical, I no longer think it the spawn of all evil. Others seemed keen to ignore any negative comments on PFI, so it was a surprise and a delight that the Committee managed to produce a broadly consensual report, even though the process involved a healthy debate on almost every paragraph. Although we have a document that balances those opinions cleverly, sadly it ultimately adds little to the debate in many respects. I shall return to that point.

In effect, the jury is still out on PFI. I cannot talk about the Government response until I have dealt with the thorny matter of the infamous paragraphs 65 to 69, which cover the evidence given by University College, London. I am a new member of the Select Committee, so perhaps I misunderstood what we were supposed to do. I agree with the hon. Member for South Swindon (Ms Drown) that the main function of a Select Committee is to scrutinise, but I am not convinced that we scrutinised properly in this case. I feel strongly that if we do not like the answers given, our job is to probe those answers.

By extension, if the evidence given by that unit was so dreadful, why did we not probe it and challenge it more at the time instead of making a late recommendation in the report? I had problems with that. Although I agree to a certain extent that some evidence given by that unit was not as good as it could have been, other evidence given by other bodies could fall into that category. It is up to us to highlight all the organisations, and not pick on one. We should have made more strenuous efforts to obtain answers at the time.

I do not want to dwell on the point, but the UCL evidence is particularly important because that unit's research underpins many reports and examples in which PFI is shown in a negative light. We are also dealing with perceptions—appearing too critical of the unit and trying to expose weaknesses in the evidence of others.

Ms Drown : Does the hon. Lady accept that we also made pains to criticise the private sector where we did not have enough evidence from it? We examined the Government's arguments and said where they did not add up. I reiterate the point that I made to other hon. Members: if we see something wrong, do we not have to say so, particularly when it has such a big influence on the debate? We must make the right criticisms of Government policy, not the wrong ones, and make them clearly.

Sandra Gidley : I have said that I agree with the hon. Lady's basic premise, and it was incumbent on the Committee to challenge that evidence more robustly and vigorously at the time so our recommendations would not come as a complete surprise when they were published. I would like to move on, because the debate on paragraphs 65 to 69 has overshadowed this wide-ranging and important report, which has been much ignored.

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First, the concordat. In the short term, of course it is expedient to use any spare capacity to reduce waiting lists. After all, that is what the public want. They do not care where they get their operations; they just want to have them. We must be careful, because that is a double-edged sword. We have a resources problem regarding doctors, nurses and other health professionals. The situation is improving, but there is still a problem. Increased use of the private sector inevitably means increased demand for nurses, many of whom currently work on an agency basis in the private sector. Nurses can do only so much, and the private sector is in a much better position to offer incentives to attract nurses from the NHS. The Government must ensure that there is no steady drift of staff from the NHS to the private sector.

Every pound directed to that sector has the potential to weaken the resource pool of the NHS, and I do not think that we have the complete answer to that yet. The signs are that there is a move towards bigger contracts under the concordat, which represents even greater potential for erosion of the NHS. I must ask whether that is what we really want.

The Committee also highlighted concerns about pay beds in NHS hospitals. Some hospitals generate a revenue stream from their pay beds, and they can prove that quite easily. However, that does not seem to be the case for other hospitals. The Government's response indicates that NHS trusts should examine the cost-effectiveness of such beds. We all agree with that. It also says that the first priority is treatment of NHS patients. That could be interpreted as meaning that private patients should wait longer, but it is widely acknowledged that convenience and speed of treatment are key reasons for people choosing private health care. Will the Minister say how that would be monitored? Would there be a report back to the House in due course? Those are all important pointers if we are to obtain an accurate view as to how the private sector truly impacts on the NHS.

I must also raise concerns about the new consultant contract, which does not appear to be as widely loved as the Secretary of State might have led us to believe when he gave evidence to the Committee. I could have this wrong, but I understand that consultants put in the first 48 hours for the NHS and are then free to pursue private sector work while the rest of the world must work to the working time directive. People such as air traffic controllers and lorry drivers have carefully controlled working hours, but we seem to be encouraging consultants to flaunt those good principles in the worst possible way.

Mr. Hopkins : The hon. Lady will be interested in yesterday's report that long hours and lack of sleep are major causes of heart attacks, which is especially significant for the health service.

Sandra Gidley : The hon. Gentleman is absolutely right and there are probably statistics that show that consultant is a fairly stressful occupation. Have the Government considered monitoring the hours that consultants work, because there are implications for patient safety?

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Accounting is a complex area and I do not claim to have "Mastermind" knowledge of all the finer points of public sector comparators, value for money and the intricacies of discount rates. I would be surprised if any member of the Committee appeared on "Mastermind" to answer questions on those subjects. It was obvious that witnesses also had serious problems understanding the intricacies of the subject. Despite the professed openness, there is still far too much scope for manipulation of the figures to present a business case. I am an old-fashioned girl and my parents always warned me against buying anything on hire purchase, which, like PFI, provides a quick fix. The problem is 18 years of underfunding. Of course people are delighted to have their new hospitals, but in the long term one will pay more.

One problem with some PFI projects is staffing. Problems are at a minimum where strenuous attempts have been made to retain staff in the NHS and to incorporate them into teams. In Carlisle, more maintenance and cleaning staff were contracted out, which caused a number of problems that have already been alluded to. Existing staff contracted out under the Transfer of Undertakings (Protection of Employment) Regulations 1981 had different contractual arrangements from new staff, which clearly gave rise to a two-tier system.

The differences are most striking when one considers staff overtime. It was much cheaper for the PFI contractor to use the newer staff, who were on a lower overtime rate, and the net effect was a drop in take-home pay for existing workers. If that situation is allowed to continue, the unions could bring a discrimination case. I hope that the Minister considers that matter closely to allow all those who are effectively working for the NHS to do so on an equitable basis.

Mr Bill Olner (in the Chair): I would be grateful if the hon. Lady concluded in the next minute.

Sandra Gidley : Okay. I was going to talk about training levies, on which I was disappointed by the Government's response, but I shall not do so. I regret that this is the first inquiry that we undertook. Although it was a hot political issue at the time and we made our choice, there was too little evidence for us to produce a hard-hitting, positive report. In hindsight, it would have been useful for the Committee to wait until more evidence was available and firmer conclusions could have been reached. We would have been able to produce a report that, instead of asking for further work to give insight to the answers, would probably have provided more clear-cut conclusions and recommendations.

4.53 pm

Mr. Simon Burns (West Chelmsford): I begin by offering my congratulations and thanks to the hon. Member for Wakefield (Mr. Hinchliffe) on how he conducted and guided us through the inquiry. As a member of a minority—some might say a persecuted minority—I am indebted to the Chairman for the fairness and decency with which he conducts our business to ensure that my minority party gets a fair share of time, in proportion to its representation on the Committee.

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It has been a fascinating experience, listening to the debate and seeing the continuing battles between old and new Labour. If the right hon. Member for Holborn and St. Pancras (Mr. Dobson) had remained as Secretary of State instead of embarking on his ill-fated campaign to become mayor of London, we would probably not have had to conduct the inquiry because the concordat would not have been drawn up in such a way. It has also been fascinating to hear the comments of the hon. Member for Luton, North (Mr. Hopkins). At one point, I was worried that there would be a punch-up between him and his so-called hon. Friend, the hon. Member for Lewisham, West (Jim Dowd).

Mr. Bill Olner (in the Chair): Not under my chairmanship.

Mr. Burns : I apologise, Mr. Olner.

On the other hand, we have new Labour—the new broom that sweeps clean—in the Secretary of State, who has negotiated and developed the concordat with a zeal that I suspect has come as a tremendous surprise to the hon. Member for Wakefield and many other dinosaurs, as I suspect his Whips Office would call them, on the Labour Back Benches. The report states:

This may come as a surprise, but I wholeheartedly agree with those sentiments.

As several hon. Members have said, their constituents, like mine, really do not mind who provides their treatment, as long as it is of the highest quality, as quick as possible and free at the point of use. Whether treatment is given in the private sector or at the local NHS hospital is, to all intents and purposes, and despite the opinion poll of the hon. Member for Luton, North, which I suspect was conducted at the last Unison conference, irrelevant to our constituents, because they have a different priority.

The concordat goes far beyond what anyone on 1 May 1997, let alone during the election campaign leading up to that date, thought that a Labour Government would contemplate doing. One must ask why Labour, having crucified the Conservative Government, who were deeply committed to the principles of the NHS and for ever being accused by the then Opposition of wanting to privatise the health service when they had no intention of doing so, has decided to do what the Conservatives never would have contemplated in a month of Sundays.

In a significant contribution, the hon. Member for Luton, North accused his own Government of potential privatisation of the NHS. It may surprise the Minister, but even I do not accept such a Machiavellian thought process. The hon. Member for Luton, North completely misses the point of the concordat—this is where the Minister and I may start to diverge—which has been created by the Government's near obsession with targets and their desire to meet their 1997 election promise to bring down waiting times. Finding, after 18 months or so in power, that they were having significant problems meeting their political targets, they went for what is, basically, a sensible option: using spare capacity in the private sector for NHS patients to be treated free at the point of use.

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The Government are right to do that. If there is a capacity problem in the NHS, rather than let our constituents suffer by waiting longer, why not use spare capacity through negotiated deals with the private sector, providing that treatment is free at the point of use? That, I understand, is what the Government have done through the concordat.

Mr. Hinchliffe : Will the hon. Gentleman, in his attempts to understand the concerns that some of us have about the direction that the Government are taking, reflect on what the Conservative Government did in privatising care of the elderly at a cost, according not to me, but to Mr. William Laing of Laing and Buisson, of at least £10 billion in social security subsidies? As the hon. Gentleman well knows, homes are being closed on profit and loss considerations rather than the interests of old people. That is why one or two of us have slight reservations over private sector involvement.

Mr. Burns : I am genuinely sorry that, due to Health Committee commitments on Monday night, the hon. Gentleman did not have the good fortune to be in the Chamber for the care homes debate. If he had been there to listen to the speeches with great care—I recommend that he read them—he would understand that his analysis is, sadly, off the mark.

I do not think that anyone who cares about the vulnerable, and has an ounce of decency in them, would disagree with the principle adhered to by the Government in the 1980s, which I suspect is also the principle of this Government. Instead of keeping the elderly in long-stay hospitals with a minimal quality of life and dignity, those hospitals should be closed to enable the patients to have an enhanced quality of care, whether in a residential home or in their own home with a domiciliary care package, where relevant.

Just as this Government, because of the shortage in NHS capacity, have had to seek out the private sector and use its spare capacity, at that time, the private sector—in most cases, although not all, as there was some NHS and local authority provision—helped to make up the shortage of capacity and to meet demand. I make no apology for that. It was the only alternative to the grim and in some ways almost Dickensian hospital wards, where sad, frail and vulnerable people had a miserable existence, not even a proper life.

I am grateful that the Government have produced a response in time for this debate. As time is short, I shall allude only briefly to one or two matters. Paragraph 21 of our recommendations says that the Department

I think that that is crucial, and so do the Government. In their response, they agree with the Committee that

That is right and admirable. In elaborating on that response, the Government rightly discuss GP contracts, consultant contracts and important matters such as conditions and terms of employment for health care and other jobs.

I am concerned and surprised, however, that the response does not refer specifically to nurses. I have a concern that I would like the Minister to re-examine. As

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we found out at Prime Minister's Question Time yesterday, accommodation costs in London and the south-east are causing grave problems for the recruitment and retention of crucial staff in the NHS and other fields. As one measure to try to alleviate that problem, the Government have introduced cost-of-living supplements for nurses. Most home counties have been receiving those from the last financial year, although Essex has received them only from this financial year, which is odd as we adjoin London and have high housing costs. However, I welcome the fact that the Government have rectified that.

Even so, I remain concerned that only nurses of grade C and above are eligible for those supplements. That is a mistake. Many junior nurses who have spent many years working in the health service and who are skilled and highly trained up to their level find it difficult to cope with the cost of living in the south-east. Even so, that rule bars them from receiving the cost-of-living supplement. I hope that the Minister reconsiders and tries to persuade the Treasury to relax the rules.

As time is short, I shall raise two other matters briefly. The first concerns consultants. I wholeheartedly agree with the Government's rejection of the report's recommendation that details of payments for NHS activities made to consultants working in private settings should be published by trust boards. I do not believe that that would take us one iota further in the argument or serve any useful purpose. I am pleased that the Government agree with my assessment and have rejected that proposal.

Secondly, our Chairman is sharp and he does not often have the wool pulled over his eyes, but when the Secretary of State gave evidence during the concluding part of our inquiry he did a marvellous job—I hesitate to say that he used spin—in convincing the Chairman that there is no Government climbdown over the seven-year contract rule. In fact, we now know from the small print that the Government have caved in. Although they may have got what they claim to be concessions to enhance the NHS in other ways, on the central argument that is so close to the Chairman's heart, they gave in, although that was realistic and sensible.

Much has been said about PFI, so I shall be brief. It has been said that imitation is the greatest form of flattery, and I am glad that the Conservative Government have been flattered to the nth degree by this Government, who have embraced, enhanced, expedited and expanded the concept of PFI. It is a pity that I do not have more time to go through lexis nexus, but I would dearly love to know what the hon. Members for South Swindon (Ms Drown) and for Harrow, West (Mr. Thomas), and perhaps the hon. Member for Lewisham, West, said in public statements on PFI before the 1997 general election. I suspect that they thought it an horrendous Conservative party conspiracy.

Ms Drown rose—

Jim Dowd rose—

Mr. Simon Burns : No, no. I suspect that they thought it a conspiracy, in the words of the hon. Member for Luton, North, to privatise the health service.

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Mr. Bill Olner (in the Chair): The hon. Gentleman is about to conclude.

Mr. Burns : Yes, I am concluding, Mr. Olner.

I reject that accusation, because we were not proposing privatisation. If badly needed hospital facilities can be provided for our constituents more quickly than by going through the labyrinthine and neanderthal rules of the Treasury, that must be examined and, provided that we safeguard taxpayers' interests, embraced.

5.7 pm

The Minister of State, Department of Health (Mr. John Hutton) : I am delighted to respond to what has generally been a good-tempered debate. It is clear to all of us who have listened to the exchanges that these matters have raised substantial and deep divisions of opinion throughout the House over the relationship between the private sector and the national health service.

I agree with everything that has been said about my hon. Friend the Member for Wakefield (Mr. Hinchliffe), who has done an exceptionally good job in chairing the Select Committee and continues to do so. He has produced a report that makes a useful contribution to the debate and has taken it a significant step forward.

I shall respond briefly to some of the many points raised by my hon. Friends and by Opposition Members, confining the closing section of my comments to the report and the Government's response to it. My hon. Friend the Member for Wakefield spoke eloquently and articulately about the relationship between the private sector and the NHS, making points about the PFI process and how he feels that it is skewed in favour of PFI rather than the public sector.

All members of the Select Committee are aware that that is not the view of the National Audit Office, which has examined many PFI schemes, including at least one in the NHS, and has reported that the risk figures have not been manipulated. It would be a huge mistake, and it is certainly not the Government's intention, to torture the PFI data until it confesses. That would not take the debate any further.

We must have an open and transparent debate. In our response, we set out a number of ways to improve that transparency, and it is important to the NHS and to the House that we have a rational debate on PFI. At least one of my hon. Friends convinced me that we have not yet made sufficient progress in that respect.

Mr. Hinchliffe : I have listened carefully to my right hon. Friend. He will recall that I referred specifically to comments made subsequent to our taking evidence from Mr. Coleman, which were reported in the Financial Times. Has my right hon. Friend had the chance to study those comments? They were quite strong on the public sector comparator.

Mr. Hutton : It came as a surprise when my hon. Friend cited those remarks. That is not the view of the NAO, which reported on PFI and, especially, on the public sector comparator, which was the basis of my hon. Friend's observations. The NAO has produced a number reports on the public sector comparator and the

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value for money aspects of PFI, and it confirms that PFI produces value for money. I am sure that there is an explanation, and I would be interested to hear Mr. Coleman's.

Ms Drown : The point is not that PFI always gives value for money, which is what my right hon. Friend is hinting at. Each case must be assessed on its own merits. The Committee recommends that more public sector capital is needed, so that we can genuinely compare one with the other rather than worry that people are trying to fix the statistics. That is crucial. I would be grateful if he responded to that point. I understand that the NAO report on the Dartford and Gravesham hospital says that the scheme was skewed—it was rather overestimated—but that it nevertheless provided value for money.

Mr. Hutton : My hon. Friend is absolutely right in relation to Dartford and Gravesham. The NAO report shows that it would produce savings of about £5 million for the taxpayer.

I am sorry that my hon. Friend the Member for Luton, North (Mr. Hopkins) is not with us. He is concerned that PFI does not produce savings for the taxpayer and therefore for the NHS, and he favours an exclusive reliance on public sector capital. My hon. Friend the Member for Lewisham, West (Jim Dowd) comprehensively debunked that argument, and I do not want to re-enter that territory. When it is clearly shown that PFI provides value for money, as in that case, I would expect all members of the Committee to sign up to greater objectivity in the PFI debate.

I am a little disappointed that the critics here today did not refer to the NAO report on the PFI. Our objective work on value for money has produced the result that PFI gives value for money. That result also means, as they say on the terraces, "It's all gone quiet over there." That is not a hallmark of a rational or transparent debate.

Mr. Burns : Is the Minister disappointed? Did he think it disappointing when the hon. Member for Luton, North suggested that if the Government continue with PFI, it will have the effect of the Government privatising the health service?

Mr. Hutton : I cannot say that I was surprised.

Mr. Burns : Disappointed?

Mr. Hutton : I was certainly disappointed. My hon. Friend has a substantial record of opposition to PFI, as do other of my hon. Friends. I have no problem with that difference of view. Fine; let us have the argument and let us hear the issues. It is certainly a gross caricature to present PFI as the privatisation of the NHS. I do not and would not subscribe to my hon. Friend's views.

My hon. Friend the Member for Bristol, North-West (Dr. Naysmith) told us how people reacted to the Committee's report. No one could say, having read it, that it does not pose hard and difficult questions on Government policy. That is the Committee's job, and we would be surprised if it had done anything less.

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I congratulate my hon. Friend the Member for Wakefield and the members of the Committee, as the report is a significant step forward.

The hon. Member for Basildon—

Jim Dowd : Southend.

Mr. Hutton : Of course, he has moved to Southend. I apologise to the hon. Member for Southend, West (Mr. Amess). That was genuinely not a deliberate slight; I have Basildon in my notes. Whenever we see him, we think of Basildon, and that will take some time to change, although not as long as it took him to move from Basildon. However, we do not want to go into that.

The hon. Gentleman likes to live in the past on the issues. He spent most of his time talking about what happened between 1997 and 1999. Fair dos. He is at liberty to approach the subject in that way, and I understand why he would prefer to live in the past. In those days, the Tories said that they would get elected and win general elections, but those days are over. My hon. Friends made pertinent comments in response to his speech. He and his colleagues must ask themselves why such an electoral calamity befell the Conservative party. In no small part, it was due to the Conservatives' record on NHS management. With respect—I do respect him—I have never heard him allude to that in his speeches on the NHS since 1997, which is a conspicuous omission.

The hon. Gentleman referred, as did many of my hon. Friends, to the new consultants' contract that we have successfully negotiated with the British Medical Association. Most Labour Members got the strong sense that he and the hon. Member for West Chelmsford (Mr. Burns) would have liked the negotiations to fail, so that there would be a row. They would have much preferred that outcome.

Mr. Burns : For the benefit of the debate, the Minister should not try to put words that we have never uttered into our mouths.

Mr. Hutton : Oh dear, there is some sensitivity there, and that is a strange observation to make. The hon. Gentleman talked about the new contract deterring new consultants from joining the NHS, but that is certainly not the view of the BMA, which warmly and strongly endorses it. It is a good deal for the NHS and for patients. Many hon. Members referred to the fact that there was give and take in the negotiations. Of course there was; they were negotiations. The contract will ensure that we have the opportunity to make the maximum use of the skills and talents of new consultants who join the NHS.

The hon. Member for Romsey (Sandra Gidley) referred to the working time directive. She needs to have a look at it, because she does not understand how it works in relation to the 48-hour maximum week. I shall arrange for a copy to be sent to her.

The hon. Member for Southend, West referred to Southend hospital. I am delighted that he is doing a shift—

Mr. Amess : At 6.50 am.

Mr. Hutton : Indeed. It is fantastic that the hon. Gentleman is shadowing nurses. Southend has a great hospital. My mother and two of my sisters worked for long periods there.

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My hon. Friend the Member for Carlisle (Mr. Martlew) spoke about the problems in his constituency, which he, I and everyone else know about. I will be happy if he wants to discuss the issue of capacity with me in more detail, and to bring a delegation down from Carlisle. I am grateful for the support that he has shown for the staff of the hospital in Carlisle. He is an eloquent champion of his constituency.

The hon. Member for Wyre Forest (Dr. Taylor) mentioned bed definitions. In this place one has to be accountable for all sorts of weird and wonderful subjects, and I am happy to enter into correspondence on that if he would find it helpful. We always try to be consistent, so that we are all clear about what is and is not counted. That is important in the evidence that we provide to members of the Select Committee. If the Committee itself has any concerns on the subject, we stand ready to help it.

I agreed with virtually everything that my hon. Friend the Member for South Swindon (Ms Drown) said. Perhaps that is no surprise to her, but she made a good speech. I was especially impressed by her approach to PFI. She described herself as a critic of and cynic about the benefits of PFI, and has considered the arguments with an open mind, which is important.

I do not want to say much about my hon. Friend the Member for Luton, North because he is not here to respond to my remarks, and he would not like them. On the basis of his remarks, I do not think that he understands the PFI process. He made one comment about PFI partners being able simply to hike up the instalments. That is completely untrue. They are fixed at the beginning and cannot be changed other than by agreement. He completely misunderstands the process, as do other hon. Members, particularly the hon. Member for Romsey and the hon. Member for Wyre Forest. They turn a blind eye when it suits them to inconvenient evidence about value for money and PFI, and that does not advance the debate.

I welcomed the approach of my hon. Friend the Member for Harrow, West (Mr. Thomas) and his support for our partnership work with the private sector in improving health services. He asked me specifically about the future of Mount Vernon. There are no plans to close Mount Vernon hospital and I hope that that is of comfort to him. He will be aware that Bedfordshire and Hertfordshire strategic health authority is reviewing the provision of acute services in that area, including the cancer services provided at Mount Vernon. The strategic health authority is to prepare a short list of options in a discussion paper to be published in the autumn, and more formal public consultation will take place early next year. The strategic health authority is committed to engaging the public in that consultation process, and I am sure that my hon. Friend will want to take part in it

My hon. Friend the Member for Bristol, North-West made a number of telling points. I agree with his overall view of the report. My hon. Friend the Member for Lewisham, West was right to emphasise the importance of good management in the PFI process. As we tried to make clear in our response to the Select Committee's report, we are taking action within the Department and

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across the NHS to strengthen the management of PFI. There is always a risk in such projects—they are major capital projects. It might be transferred to the private sector through this process, but the NHS still has a critical role to play in ensuring that PFI delivers what we want—new hospitals, on time, providing the right environment in which to treat patients. He was right, and so was the Select Committee, to identify that we have a problem with project management expertise in the NHS. With every PFI project we reinvent the wheel. That is not good. Several such schemes are now in place, and we are beginning to put together a considerable amount of expertise in managing PFI. We must not squander it.

On pay beds, my hon. Friend and many other hon. Members have referred to recommendation (c) in the Select Committee report. I hope that he and others are satisfied with the Government's response. He also mentioned the ratio of single beds in new hospital schemes. The figure that he quoted—50 per cent.—is for guidance; it is not compulsory. It is important to increase the number of single beds because that is a practical and tangible way of enhancing privacy and dignity. We have had a lot of debate about the relationship of the NHS with the private sector. I would like more NHS hospitals to resemble in quality and standard the private hospitals that we are using for the benefit of the NHS. That is our ambition.

Jim Dowd : I accept that we should aspire to those standards. However, the fear is that we shall merely see beds being replaced with new beds, rather than with the perfect model of what should go there. In Lewisham, for example, the scheme might founder on this, yet it would mean that we could get rid of old Nightingale wards dating back to the 19th century and mixed sex wards. The balance needs to be made in the round.

Mr. Hutton : My hon. Friend speaks a great deal of common sense. We should all like to build utopia tomorrow in the NHS, but that is not possible. We need to approach the task of re-equipping the NHS with new hospitals for the current century in a sensible way. We should like to do all sorts of things and we must continue to push for them—increasing the ratio of single beds in new hospitals is an important long-term project.

The hon. Member for Romsey said that the jury was still out on PFI. I know that that is the view of many here, including my hon. Friend the Member for Wakefield, and I have every respect for that view. I genuinely look forward to the time when I get letters from Liberal Democrat Members urging me not to proceed with PFI hospitals in their constituencies because they think that the jury is still out. I have a fairly strong suspicion that I shall not receive such letters soon.

The hon. Lady also expressed concern about staff drifting away from the national health service. There is absolutely no evidence whatsoever for that assertion. In fact, the NHS now has more doctors, nurses, therapists, cooks, cleaners and porters than it has ever had. In particular, there are now 31,500 more nurses working in the NHS than in 1997. I agree that there are still pressures in the system. For example, historically, in London and the south-east, there has been high use of agency staff, which we need to reduce, but that is the aim

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of the NHS professionals scheme. To hold out the spectre of staff drifting away is not a sensible contribution to the debate because it simply is not happening.

In talking about nurses, the hon. Member for West Chelmsford mentioned the need to create incentives for good performance, and he was anxious that nurses should not be left out of the process of pay modernisation. We are reviewing the contracts of GPs and modernising consultants' contracts. The hon. Gentleman will be aware that the agenda for change negotiations, which started with non-pay review body staff, but also with nurses back in 1999, have now moved on to detailed negotiations about all these issues. The hon. Member for Romsey asked about equal pay for work of equal value. That will be a fundamental building platform for the agenda for change negotiations. We do not want to leave nurses out of the programme of pay modernisation.

Mr. Burns : I am grateful for that answer, but what about cost-of-living supplements and grade C nurses?

Mr. Hutton : I apologise. I did make a note of the hon. Gentleman's comments, but in my hurry to move on to what is now clearly not a deliverable speech, I overlooked that question.

We introduced cost-of-living supplements two years ago specifically to deal with growing labour market issues and high cost-of-living problems predominantly in London and the south-east. Cost-of-living and premium pay issues must be dealt with as part of the new agenda for change negotiations and discussions with NHS trade unions. I imagine that cost-of-living supplements will form part of the negotiations on the new pay structure for the NHS. It will be some time before the new system is introduced, and we will want to keep a close eye on cost-of-living supplements between now and then to examine the case for extending them to a wider group of staff. However, such decisions must focus on difficulties relating to recruitment and retention. If the hon. Member for West Chelmsford wants to raise with me his concerns about grade C nurses in his constituency, I shall be happy to discuss the matter with him.

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I do not want to repeat arguments that have already been made about the future of our relationship with the private sector, but I shall deal with some more specific points. My hon. Friend the Member for Wakefield was concerned about whether reference costs provide a sufficient measure of value for money in the NHS. We accept that they do not, and we have tried to set out in our report several ways in which we can strengthen reference cost data. However, as we tried to emphasise in our response, they provide helpful management information. We have set out at least three ways in which we can make improvements. The NHS costings manual has been revised. Reference costs have been considered in relation to the district audit process, and there is now a new verification process.

My hon. Friend also referred to the evidence that my right hon. Friend the Secretary of State gave to the Committee. He set out four essential tests that we apply to each prospective partnership in the NHS and private sector. Is it in the interests of patients? Is it consistent with the local and national strategies of the NHS? Is it value for money? Is it consistent with public sector values, including that treatment is determined by clinical need and staff are treated fairly? Those are the yardsticks by which we will judge and develop our relationship with the private sector. Provided that those tests are satisfied, we should use the private and voluntary sector where it has a track record of achievement or where it can offer clear potential gains. In its report, the Committee has done something very important, in making it clear—as did my hon. Friend the Member for Lewisham, West—that the question is not whether the NHS should have a relationship with the independent sector but on what terms that relationship should be conducted and what the benefits are for NHS patients in terms of fast, high-quality treatment and value for money. Those are issues of joint concern for the Committee and the Government.

Of course the public sector has a well-established ability to provide many services to high standards. That has never been at issue, but it does not have sole expertise—

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