Examination of Witnesses (Questions 340
THURSDAY 8 NOVEMBER 2001
340. Can I ask just a quick factual question.
Is not one of the barriers to that that sometimes, say, the cleaning
contracts, the staff are not dedicated to the National Health
Service, they can be cleaning an office one day and cleaning somewhere
else the next day, and then doing a hospital? That does happen
occasionally, does it not, or am I completely wrong about that;
I have heard it said it does?
(Mr Rose) It will only happen if we have a particular
shortage in the contract, or if people are moving, but if we are
running a contract, however many services, we will have a dedicated
team of people from blue-collar right up to management, who we
hope will be there for the length of the contract, unless they
are promoted onto other jobs.
341. Just to make clear what I am saying, in
the National Health Service at the moment there are cleaners and
ward assistants of various sorts who tend to be assigned to one
particular ward or an area of the hospital; is that not true?
(Mr McGuire) It would be the ideal, but, again, because
of the recruitment difficulties that we have got, it is often
the case that we move people round, and there is inconsistency
in the teams, particularly in clinical areas. That would be the
(Mr Turner) We do not have the same recruitment problems
in Bradford, so, more or less, the domestic on the ward is there
permanently and part of the ward team, but we do not have the
same problems that they have in Leeds with recruitment.
342. A question to Mr Rose. You appear to rule
out extending the TUPE type provisions to new staff unless the
costs are built into the contract price. Now that might suggest
that you can only get efficiency improvements from staff conditions
and changes, you will not be able to get the delivered returns
if you carry on with the cheaper provisions. Where are your efficiency
savings going to come from?
(Mr Rose) Can I make it clear that the comment about
the costs being included in the contract is making it clear that
the client has to accept that going down that route, which we
are more than happy to accept, may result in a change to the overall
pricing of the contract, for every bidder, it is not just one
company, it is every bidder, because there are going to have to
be different costs built in than the client at present prescribes.
We are paying local rates, it is because the client wants that
in the contract, not because we do it for our own benefit. The
efficiencies; the way we want to show that we can do things better,
the way we want to prove we can do things better, is through introducing
efficiencies through different practices, that is ways of service
delivery, through different techniques which we are developing,
through innovation which comes, which we have found maybe in another
country in the world, where we can bring it into a particular
Trust. And we believe that we can continue to contract with the
public sector and to bring those efficiencies, against the background
of paying staff at those rates. We do not want to win contracts
on the basis that we do not pay, because that is not our basis.
343. You talk in very vague terms, it sounds
like an NHS consultation document, I have to say; you cannot argue
with any of that, there are no specifics there. Have you got some
specifics as to the sort of efficiency savings and innovative
thinking that has resulted from this? Because it is all sounds
very fine, but what does it actually mean in practice?
(Mr Rose) Chairman, apart from the fact I do not have
the information on me, because of the large number of contracts
with which my member companies are involved, it would mean that
you did not get a break at lunchtime, because I could go on for
hours talking about the different things we do, and in the back
of the evidence, as you know, I highlighted three instances where
that has happened. This is the standard that we like to adopt
in all the contracts which we have in the public and the private
sector, both in this country and in up to 70-odd countries worldwide.
We have the ability, as very large companies, to draw on that
expertise and to apply it to whatever size of contract we are
involved in, and that may be five people providing food in a hospital,
or ten people cleaning a ward, or it may be 2,000 people who transferred
to us in a major PFI. It depends on the circumstances of the contract,
it depends what the client would like us to do, because the client
still has the dominant position in this; we can propose things,
but if the client does not want it it will not happen. And there
are lots of instances; and if, Chairman, you wish a further supplementary
paper, giving some of those, I am more than happy to get it from
member companies, because we have lots of examples of the different
ways in which we have changed service provision and improved service
provision within particularly longer-term contracts.
344. It might be helpful, if it is not too much
(Mr Rose) Yes, I will do that.
Chairman: Thank you.
345. Is that not an admission though that you
are going to pay staff less, if you are saying that to keep new
staff on TUPE conditions it would cost the NHS more; because you
could keep all your staff and bring on new staff with the same
pay rates as the TUPE staff, so the new rates are the same ones
as the transferred NHS staff, and do all the innovation that you
have been talking about?
(Mr Rose) There are two issues, Chairman, which are
raised here; one is the current position and one is the Government
proposed position. Currently, as those bidding for contracts,
we are expected by the client to pay new staff at the going rate,
or above, locally; sometimes this is below the NHS rates, on many
occasions it is above the NHS rates, and we are obliged to pay
those rates. In certain parts of the centre of London, and as
Stephen Weeks knows, we are very, very much above the rate, and,
indeed, on a couple of contracts in London we are not even paid
to pay that rate, but it is the only way we can get staff because
of the shortages. Government has expressed a concern, and the
trade unions have expressed concerns, about the fact that there
is this, or what they see as, different pay rates. Within NHS
Trusts, and I mean individual Trusts rather than groups of Trusts,
there are, to my certain knowledge, up to five or six different
sets of pay rates operating because of the way Trusts have come
together because of the way staff are employed; so there is not
a unitary rate across many Trusts in the UK. And, of course, the
Whitley rates are changed by local agreement, so that Trusts are
paying at different rates anyway. What we have said, and what
we believe is, that it is possible to continue to bring value
to the public sector by agreeing that new staff being taken on,
either with the agreement of the Trust, or, indeed, preferably
by Government policy, will be taken on at broadly equivalent rates
to those in the public sector. That has to be something that is
done by the Government and then passed down to the client in order
that the playing-field remains level, or else you will find that
one or two bidders do it on that basis and somebody who wishes
to get the job comes in and does not, and we get into an even
worse position where people feel they have really been short-changed.
And at the present moment we in BSA are working with the TUC,
with DTLR, with the Treasury, and with DoH, on ways in which we
can address this, and you have a paper as part of the evidence
showing what we have done; and we are working very closely with
all those bodies on it, and it is proposed that the TUC and BSA
have a joint working party to make recommendations to Government
346. Just quickly, you would only be saying
that this might cost the NHS more in those areas where at the
moment the market conditions are such that you can pay people
less; in other areas of the country where at the moment you are
paying broadly comparable or greater rates then this new suggestion
would not have an impact on the costs, and therefore on the contracts?
(Mr Rose) It would not, in those circumstances. It
might have, I think is the answer, a financial impact where the
current market rate is less, but we do not know; because there
are stories and there are instances of where the attrition rate
in employees is high within a contract, there are others where
at the end of a three- or five-year contract 80-odd per cent of
the staff are still there, because they enjoy the relationship,
and a lot of the ones who have left have left because they have
been promoted within the company.
347. The Retention of Employment Model, you
have outlined a series of problems, in your memorandum, that you
have with that. Those problems, in the way your document is written,
saying things like "having seconded employees and private
contractor employees would lead to a `them and us' culture, would
destroy team spirit in working relationships, could make communication
more difficult and complicated, has the potential to lead to mixed
messages and misinformation, and that the private contractor employees
would be treated differently from seconded workers", does
not seem to be in the same spirit of partnership that you were
talking about earlier, in terms of a ward sister being in charge
of your staff?
(Mr Rose) Chairman, to respond to that question, the
Retention of Employment Model was one which was agreed between
UNISON and the Secretary of State for Health, and which was then
delivered to us in the private sector with no prior consultation
at all. There are a large number of issues within it which have
not yet been explored, either by the Department or by Trusts,
or, indeed, so far as I am aware, by the trade unions, certainly
in consultation with us, and these are the issues which we have
raised in a memorandum to Alan Milburn, of which you have a copy;
they need to be looked at. These are not issues of non-partnership,
we are simply saying that, realistically, if we go down this line,
it is going to introduce, or we believe it has the potential to
introduce, a "them and us" culture, which we have fought
for the last ten years to get away from.
348. Why is that different, a "them and
us" culture, from the culture within existing PFI contracts?
(Mr Rose) We do not have a "them and us"
culture in existing PFI contracts, to my knowledge, we have a
culture where we all work together to achieve the ends which we
have agreed mutually. We are looking here at a proportion of staff,
possibly 85 per cent of staff, remaining in the public sector,
but at managers and supervisors moving across into the private
sector under TUPE. It means that people are going to have two
sets of bosses, one of whom pays, one of whom manages. All of
us know, from our own experience, if there are two we will play
one off against the other, it is simply human nature; we do not
want to have problems, in the way that services are provided,
where we are asked to come in and help to provide those services
by the client.
349. But is not that just the same as the example
we were going over earlier, where the ward manager is managing
your domestic staff but you are paying them?
(Mr Rose) No, it is not, because there we have a clear
division as to who is employing and paying whom, and we can work
very closely in partnership there. This is an area which needs
a lot of work, and we do not believe enough time has been given
to the major issues of the operation of this policy, as opposed
to the political desirability of the policy, and we are seeking
to work with Government in relation to the three pilot projects
at present, and we are working closely with them and the Trust
to iron out those issues. And the purpose of that memorandum was
to indicate a number of the issues that we believe need to be
addressed before this issue is taken further.
350. But you are not ruling out the possibilities
of it, and PFI could still be attractive to your members, under
the Retention of Employment Model?
(Mr Rose) Certainly not, we would be stupid to do
that, because if that is the way that the market is going to go
we will work with it, and in certain single-service, shorter-term
contracts we already have experience of working with seconded
staff, and that can be successful, but there are always tensions
between the staff and where their loyalties lie.
351. And can I just ask Mr Weeks, in your papers
you seem to be supporting the model that most of the staff do
stay with the NHS but the external company does employ the managers
of the service. Is not that just as divisive as any other division?
(Mr Weeks) I think I would actually refer you back
to what the paragraph actually says, which is: "UNISON, whilst
remaining opposed to PFI and the use of private sector management,
welcomes the new approach." We, in principle, still believe
that PFI itself is wrong and that the involvement of the private
sector is not the right way to go, but we want to work with the
Government, the Government has made a very significant proposal
which we welcome, and so we are prepared to go to those discussions
with a positive attitude and try to make it work.
352. So your ideal would be for the managers
to stay within the NHS as well?
(Mr Weeks) Our ideal would be not to have PFI at all,
but in a PFI contract for all services and their management to
remain within the NHS, and a number of Trusts have successfully
gone down that route. But the Government has said that they believe
that there are gains from involving private sector management,
in relation to innovation and other issues, and so we have said
we are prepared to engage with that discussion.
353. And the same argument, I imagine, you would
say for maintenance engineers, that you might accept in existing
PFI contracts that maintenance engineers might have to go to the
private sector, but other staff might stay within the NHS under
the Retention of Employment law?
(Mr Weeks) We will continue to make the argument for
maintenance, but we understand why the Government has chosen to
draw that distinction between ancillary services and those services
they regard as connected with the building; we do not agree with
it, but we think there is an internal logic to it. I do just want
to comment, very briefly, on the questions that were raised about
the Retention of Employment Model. I do not want to appear unconstructive,
but it is not actually true to say there has not been detailed
discussion around all of these practical issues. The initiative
was actually launched in June; we have yet to agree, formally,
with the Government about how the pilots will work, precisely
because we have been working out the detail, and the Department
has consulted with all parties involved. Obviously, the Government
made the decision to make that proposal, and they consulted on
how it will work, not whether it should go ahead. Now, we have
worked very positively within those discussions, and we hope that
it will be possible to find a workable model very, very shortly.
And just finally on the "them and us", I think that
there may be issues when you have different people employing as
compared to managing, but the NHS is currently pursuing a wide
range of initiatives involving partnerships, a service is managed
by one person and employed by another. General practice has always
had that arrangement. We do not believe they are insurmountable.
And we would say the industrial relations implications of transfer
are the ones that have actually led to conflict; you only have
to look at the historical record of what issue has led to conflict
around PFI; if we can address that issue, we will move forward
on a partnership basis.
354. Finally, you said there that your ideal
was to have no PFI; in your memorandum you said you would like
to see a moratorium on the use of PFI, pending the independent
review of the existing schemes. And given these schemes are 25,
30 years, what, in your view, is a reasonable time period before
that review could take place?
(Mr Weeks) The review is about whether PFI is the
right route for public finance, so I think the review can actually
take place right now; and, I think, the model that the National
Audit Office adopted in relation to Dartford and Gravesham, they
may not necessarily be the right body but they were asking the
right questions. And so I think the review is about whether PFI
is a choice.
355. The review of the business case is not
about what it delivers for patient care over 20 years?
(Mr Weeks) I think there are functioning schemes now,
so we have got some historical, some practical examples to look
at; so I would think you could run the review of how it has worked
as delivery of service at the same time, and we would be happy
to talk to the Government about the terms of such a review and
how it would work in the timescale. But we want to establish that
356. Could I just raise another issue, about
savings and reduction in costs. We talked about in terms of the
service contracts, but with falling interest rates there is a
potential for refinancing PFI schemes. I know the Public Accounts
Committee has suggested that some of that benefit, if it does
occur, should go to the Trust. I am not sure whether that is enforceable
guidance or not, but is it right that the private sector contractor
should be able to refinance, if there are lower rates, and accrue
the benefits themselves, or should part of that benefit go to
(Mr Rose) Chairman, before I answer that question,
I would draw attention to the fact that the National Audit Office
will be publishing a report on the 29th of this month, which is
a major review of PFI projects over the last four years. I have
seen the final text of it and it is a very interesting document,
and I am sure they will be delighted to release it to you in advance,
for the benefit of your discussions. And coming on to Mr Austin's
comments, there is already a protocol in place with the NHS that
where there is refinancing the gains will be shared on a 50/50
basis between the private sector and the public sector. Initially,
there was not a thought that projects in PFI would be refinanceable,
because it was a brand-new area and the market was very jittery,
and so, inevitably, initially, there were some reasonably high
rates of finance; as the market has become more attuned to what
is happening, rates have gone down, or rates of return rather,
interest in PFI, however, has gone up, and therefore there is
a refinancing gain which can be brought. Clearly, there are a
couple of high level cases where the private sector is alleged
to have made many millions of pounds out of it; before that happened,
and I think it was two years ago, a protocol was put in. The Office
of Government Commerce and PUK, Partnerships UK, are conducting
an exercise now, reporting in December, on refinancing and new
guidelines, which Government will put out across the whole of
the public sector, to make sure that there is an equitable sharing
of gains which come from any future refinancing of PFI projects.
And, remember, what is refinanced now may become very much more
expensive in the future when interest rates change, and we may
find that it is becoming rather difficult for the private sector
to keep the rates which are there at present.
(Mr Weeks) Obviously, UNISON takes a quite different
view. In view of the time, I think it would probably be best if
we submitted our paper around refinancing directly to the Committee;
but we take a completely different view, as outlined in our evidence.
I just would point out that the NHS did act somewhat more speedily
than some other Government Department in introducing its own guidance
on the sharing out of refinancing gains, and, although we are
not completely happy with that, we would say that they have made
some moves in the right direction. We are still worried, however,
about the very first wave of PFI that was approved before the
guidance came out, I think, in December 1999; though none of them
have actually gone out to refinancing, any one of them could do
so, and, as far as we are aware, there will be no claw-back for
the public sector in those schemes, and we do not regard that
as an acceptable product of public policy.
357. While we are on PFI, the attraction of
particular types of PFI, one of the issues, which was perhaps
the contentious issue, is the issue of clinical services, and
perhaps I could put the question to Mr Rose and ask him what obstacles
he sees to clinical services being included in the PFI?
(Mr Rose) I do not think there ought to be any objections
in principle to at least some clinical services being involved
in PFI, and indeed they are at present. A number of my member
companies already provide agency nurses into NHS hospitals because
there are not enough nurses there; there are instances of dialysis
units and intensive care units being provided by the private sector,
and indeed being used far more intensively than often they are
within the public sector. Clearly, the issue of clinicians being
outsourced is an emotive one, though, as Stephen Weeks said earlier,
we have it already in relation to GPs, who are private operators
who get a fee from the Government for the services they provide.
And, indeed, clinicians, certainly at consulting level, seem to
spend a lot of time in private hospitals, and to make a lot of
money in private hospitals, because they make themselves available
there; and I am not making any comment on that, there is a need,
they are available and they go there.
358. You are not suggesting, are you, that the
NHS benefits from that?
(Mr Rose) We would like to see far greater use of
clinical facilities in the NHS, beyond that which is currently
available. We have operating theatres which are used for so few
hours in the day that it is a waste. We could have operating theatres
which operate 16, 18, 24 hours a day, we could have outpatients
departments which operate similarly, which would make far better
use of the facilities, which would be far more beneficial to the
population and the patients, some of whom work during the day,
want to come in the evening, some of whom work in the evening,
want to come during the day, people who have children; that is
not possible at present. We therefore think that there is a great
possibility to work alongside clinicians who are within the NHS,
to make better use of NHS assets and to give a much higher level
of service to the local community, and therefore to reduce the
costs, the waiting lists and the discomfort of people. So, from
an ideological point of view, I think that there should be no
reasons why there could not be a working together to make the
service better, using bought-in, shall we say, or outsourced,
services alongside those which remain at present. Because, clearly,
clinical services is an emotive issue, and I would doubt if we
would ever see it going out to the private sector, not least,
I do not think there is private sector capability to deal with
it at this stage. And you do not make a market in such an important
service, you develop an existing one.
(Mr Turner) I struggle with this concept of theatres
working short days. Trusts have targets to meet in terms of waiting
times and waiting activities; theatres in my Trust work seven
days a week for 12 hours a day, so I struggle with that concept.
Likewise, with outpatients; our outpatient clinics do not stop
at 5 o'clock, because simply if they did we would not get the
activity levels through the clinics. I do not know what scope
there is to put clinical services into PFIs, but I would just
like to say that theatres do work full capacities, as do outpatients,
in a lot of areas.
359. There has been a limited number of design,
finance and build operations in the NHS, although they exist elsewhere.
Is there any attraction for your members, Mr Rose, in competing
for PFI contracts which were just the building and the maintenance
of the building, without the other support services?
(Mr Rose) Yes, because we provide the hard services
as well as the soft services, and we provide the building maintenance
services. We believe, as the Department does, that there are added
benefits in including soft services, added benefits and value
for money and whole-life costing for the NHS, and thus for us,
as taxpayers; but if projects come out simply with hard services
then we have a great interest and we continue to bid for them.
(Mr Weeks) Obviously, we just have to record our position
to any suggestion of the involvement of mainstream clinical services
in PFI. Rather than rehearse the arguments, I think it might be
helpful if I could submit to the Committee some research evidence
we commissioned of the Australian experience, where some States
in Australia have gone down this route within a publicly-funded
system, and we believe it has been shown not to work, aside from
our overall opposition to it in principle. So perhaps if I could
share that with the Committee that would be helpful.