Examination of Witnesses (Questions 480
THURSDAY 15 NOVEMBER 2001
480. Basically, you are agreeing with the Treasury
that it would not make much difference at 6 per cent?
(Professor Pollock) I am saying it is important to
look at that 6 per cent.
481. But it is not the crucial factor?
(Professor Pollock) I think the VFM is a political
exercise. It is politically loaded. If they do not do make PFI
the best option on the discount rate, they will do it on the risk
transfer, and it does not tell us the real question, which is
what is the true cost and what does it mean in terms of affordability?
482. This brings us to what is an important
question for the Committee, if what you are saying about PFI being
an expensive form of capital is true, why do you think the Government
is promoting it? I know it is a political question..
(Professor Pollock) The macroeconomic case has been
discounted, they are only left with value-for-money and today
value-for-money is a black art, not a science. We are left with
the fact that this is an international agenda. We are left with
some of the questions that were asked at the beginning of the
session, which is what is in it for government and for business.
This is a huge new industry for accountants, lawyers, management
consultants and for construction industry.
483. Basically what you are saying is the government
fill their pockets with big business.
(Professor Pollock) There is a new pact with big business
which is not operating currently in favour of the population.
484. What you are saying is the Treasury is
quite happy to collude in the waste of public money?
(Professor Pollock) It has not opened the VFM up to
proper scrutiny and analysis and there are no proper data. You
can only say there is a much larger agenda, which is the export
of business and trade in services. For example the US health care
industry and the US government deem, the export of managed healthcare
for them, is foreign policy. That is what they have written.
485. Is the National Audit Office also involved
in this collusion with the government
(Professor Pollock) I could not say.
486.to get some value for the money
(Professor Pollock) I could not possibly comment.
It is up to Parliamentary committees to ask the NAO to do the
job of parliamentary scrutiny, as I understand it.
487. What questions do you think we should be
asking the Treasury and the Secretary of State for Health when
we have him before us in two or three weeks time?
(Professor Pollock) I think given you really need
a true understanding of the impact of rationale business and capital
charging and the switch from public to debt financing. What is
the real rationale behind the charging for the capital? Why does
the VFM appear to be a political exercise. Questions about the
discount rate and finally the risk transfer. What arrangements
are going to be made for an ex poste analysis of these
schemes. Finally, why is the data so very, very poor, and inaccessible
both from the Treasury and from the Department of Health on these
488. With respect, some of the data that is
published questioning PFI is pretty poor as well. I am not necessarily
suggesting all of yours is. Some is very anecdotal and when you
go and speak to people about it you get a different view.
(Professor Pollock) I would be interested to know
with what parts of the analysis you would not agree with?
489. I am trying to keep things absolutely simple,
can I go back to the point of the money leaking out. Capital charge
is roughly eight per cent of a trusts income which remains within
the NHS, so it is still available for patient care, whereas the
money paid to the PFI goes out of the NHS. Is that right?
(Professor Pollock) Capital charges, I believe, are
now voted as appropriation in aid. This has changed where finally
they were non cash. Of course as soon as you contract out with
the private sector for any services that were formally provided
by the NHS that will include a component of capital which you
will pay for out of your revenue budget, so at that point money
490. Thank you. I just want to go on to the
revenue cuts as we have heard it said, really to the trusts, because
this money is ring-fenced, it is a first call on your budgets.
I can only speak for the Worcester one, it appears that the first
call on their budget is something like 16 per cent of their income
to go out before anything else is considered. Is this a strain?
Have you taken this into account? How does it affect you?
491. Can I bring Miss Jackson in.
(Ms Jackson) We certainly know how much we will be
spending every year on the private finance scheme.
492. What proportion of your total income is
it? Is it something that leaves you scope and flexibility with
the rest of your income?
(Ms Jackson) I have a slight problem in answering
that questioning in that it is "commercial in confidence"
and because we do not have the bids in yet. We could answer that
question on paper. I think it certainly enables us to plan for
the future, knowing how much income is going out to the private
sector, because we know the standard of services which are to
be provided and that the buildings are to be maintained to ensure
that the patient environment is appropriate.
493. It is commercially confidential at the
(Ms Jackson) Yes. I think we can give you a written
(Ms Herbert) Yes. Our percentage is between 10 per
cent and 15 per cent. I do not have a particular concern in the
current climate that we cannot cover that, but if we took ourselves
back to the years when the NHS was having to save three per cent
year-on-year it would be more difficult to save from the entire
494. This is not leading to actual cuts in bed
availability and in the availability of services in your neck
of the woods?
(Ms Jackson) We are increasing the number of beds.
495. Increasing the number of beds.
(Ms Herbert) Could I say, I think we might have an
interesting case study here in PFIs before the government put
additional money into the NHS and afterwards. Certainly if I can
take you back to the time when our PFI was signed up, it was a
period of driving beds out of the NHS, increasing the efficiency
of the bed usage and we certainly saw a large number of beds come
out of the system in South Manchester. That was not directly as
a result of the PFI, it was as a result of reconfiguration. Some
of those beds were reprovided, some of them were as a result of
greater efficiency, being on one site rather than two. We certainly
did lose beds as a result of our configuration.
Dr Taylor: I think that is a very important
Chairman: It is very interesting.
Dr Taylor: Many of the PFIs are now recognising
because of the National Beds Inquiry that they do need more beds.
496. Can we get that clarified from the Trust?
In your experience has PFI in any way led to the reduction in
the number of beds?
(Ms Herbert) Not directly.
(Ms Herbert) It has certainly been an additional pressure
in the system.
498. Can you explain why?
(Ms Herbert) In a sense that we have had to make the
scheme affordable and in a sense that there is a front loading
of the payment profile of the scheme. There has been more pressure
on the cash flow of the system as a result of the PFI rather than
a Treasury funded option.
499. Did you not get smoothing monies?
(Ms Herbert) Yes.