Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 540 - 551)



  540. 22.
  (Mr Davis) There are 22 beds now allocated to rheumatology and 84 beds staffed up for elderly care. This is probably back to the acute hospital being an inappropriate setting for their care, it is a bed blocking issue. The scheme now has 560 beds and also a spare ward that could be brought back into use if necessary, so that brings it to about 600 beds.

  541. How are the extra 120 beds being funded?
  (Mr Davis) Within the PFI context what we are providing is all the support services and maintenance to that retained estate. There is no capital charge coming through the PFI payment stream, we are providing routine services.

  542. We are getting 120 extra beds for nothing.
  (Mr Davis) The trust will retain the capital charges on those

  543. Those remain in the public sector attracting capital charges?
  (Mr Davis) Yes.

  Dr Taylor: I am mystified.

Julia Drown

  544. One thing which has interested me throughout this Inquiry is where the private sector has been seen to add value and why the public sector could not have done that or whether you feel the public sector can do it and the private sector cannot? I am particularly interested in South Manchester, where you have had some good and some poor experiences, some places have good capital investment coming from the NHS, others are poor. In terms of reference could you suggest recommendations to the Committee and would you be able to give us guidance about particular areas in the private sector which might be able to help and why? In responding to that I wonder if KPMG could respond to this idea that if something really dramatic goes wrong in terms of risk transfer the private partner can walk away? I did want to ask some questions on refinancing but if we can do that to KPMG in writing that would be helpful.
  (Ms Herbert) In terms of where value has been added I think one of strengths of a PFI deal is that the building of the hospital is not just overseen by the NHS it is overseen by the partners to the PFI who are going to be involved for 35 years in maintaining it and cleaning it. Therefore I think there is a drive there to get a higher quality product because you have three other bodies scrutinising it, all of whom have an interest over the next 35 years. The specific issues where we have successes and weaknesses in the services, I suspect, are particular to our trust because another PFI which has the same set of partners has had a reciprocal set of experiences.
  (Ms Jackson) I would agree on the high quality of building we can expect. I do not have anything else to add.
  (Mr Gritten) From my perspective I have set out to give a positive representation of the benefits of the public sector scheme and we have a private finance initiative in renal services where we invited the private sector to convert an area of our building, which is extremely effective and we have kept the staff on our books. I am in the process of negotiating with KPMG staff for a significant PFI in the IM&T sector, where I think the risk transfer of making sure you deliver availability, disaster, recovery and a responsive IT service are precisely the sort of areas we want to look at.
  (Mr Stone) In terms of improvement there are dramatic areas, I agree with that. The integration of the information from GP through to the entire network is potentially immensely valuable in terms of saving lives. Going back to the point, if it is an absolute catastrophe then ultimately the private sector does not walkway, they crawl away in a pretty dreadful state, a) having lost shed loads of money and, b) having ruined their reputation with their funders and their future customers. One of the big differences that we have noticed with the way the PFI process has developed over the years is that there is so much more fundamental transparency and an ability to stop inappropriate deals being put together in the first place. There is a lot of care and attention paid to the structure of the bids, even to the point where we have on occasions taken a deal after the preferred bidder stage, after all of the competition has taken place and all the vigour has been applied to it, we have been brought in, and in one particular case we were able to help the bidder restructure his deal to reduce the annual charge from £9.2 to £8.3 million a year, which is about £27 million over the life of the deal. In doing that it was about making sure that the business was properly sound, robust thought through as carefully as we could and able to withstand all of the slings and arrows all of the way through. Ultimately the public sector will always retain delivery risk, whether it is the tube or hospitals or roads. What is important, and what has changed, is there is much greater care given to planning for the long term.
  (Professor Pollock) I am just quite amused about the claims of improved design. Sir Stewart Lipton, the government's architectural Tsar until he was sacked in favour of Prince Charles, said, "The design of first 15 PFI hospitals is poor, not uplifting and will not do anything for society and some designs could be putting patients lives at risk". That aside, I think there are some real issues about the planning process. Our evidence has shown there is a major problem in terms of capacity that may or may not be rectified, but there is no population needs assessment going on. Secondly, minor things like offices are not provided in many of the new PFIs. Thirdly, the reprovision of diagnostic facilities. In some parts of the country doctors are considering raising their own equity to reprovide their diagnostic facilities which have not been adequately reprovided in new hospitals. I think there are major issues about the planning of these facilities and the extent to which they will meet the population's needs. Finally, a note of caution which is on regulatory capture, a very common phenomenon in the US where you are supposed to have post-contract monitoring and compliance, where regulatory capture and corruption occurs, the risks eventually revert not just to the government but to the tax paying public and patients. Note that in La Trobe a Regional hospital in Australia, the Government of Victoria had to buy back the La Trobe Hospital because of the losses incurred on the contract and it could no longer guarantee the standard of care. In Modbury Hospital the South Australian Government has had to come to the rescue of the contractor and increase the contractual payments because otherwise the contractor would have defaulted. These are massive risks which were not transferred.

  Chairman: We may need to go to Australia to look at this.

Andy Burnham

  545. This is really to Central Manchester, because I think this must be relevant to your experience, do you think greater transparency in the PFI process, including the publication of all documents would help or hinder the process? Secondly, is there a tension between commercial confidentiality and what is in the public interest?
  (Ms Jackson) For the first point, all documents to all intents and purposes were in the public domain until the end of April this year, when the Treasury issued new guidance on not disclosing the public sector comparator or the affordability envelope. The Full Invitation to Negotiate issued on 30th April, a few days after that guidance, does include our PSC at that time but it has changed since because we have add the extra capacity.
  (Mr Deegan) In terms of transparency we set up an over arching strategic board, in hindsight we could have had membership of local Community Health Councils in June of this year rather than September or October when it was agreed.

  546. You know what I am referring to, they feel they have been particularly frozen out of the process from the beginning. It is not just about the money but it is also what is actually being planned and where the scheme, if it is changing, where it is at. I hope I am not overstating that they feel that there evidence is strong on these points.
  (Mr Deegan) Up until April all of the information was in the public domain. The three CHCs in Manchester are regular attenders at our trust board and all of the issues of PFI are discussed in Part one unless they are commercial in confidence.

  547. That is purely on the private sector part, you would have no problem in having it all in the open?
  (Ms Jackson) Our public sector comparator and our accordability envelope are commercial in confidence and until we sign the contract that will remain so.
  (Mr Davis) We have no problem with those figures being publicised, it is only when we are in competition —


  548. This evidence from the CSC is very interesting coming, as it does, before the restructuring. CSC members have concerns that significant changes affecting local health authorities have been made but not reported and by them not being discussed the public have potentially looked to the NHS for unaffordable schemes. It is quite strong stuff.
  (Mr Deegan) It is fairly strong stuff. We have tried to draw all this out in our memorandum. And certainly the understanding of the health authority, who ultimately will be providing the funding for this with the PCTs. We went through it at great lengths at the trust to involve a range of stakeholders, city council, CHCs through a project directors forum and when this ceased, we came to an agreement that we needed to move to bilateral discussions with individual organisations. We then moved to a position where the Community Health Council is on the Strategic Board and all of the key issues will continue to be discussed in Part one of our Trust Board.

Andy Burnham

  549. Once the contract is signed are you saying that they will be much more closely involved than hitherto they have been?
  (Ms Jackson) Mike is saying they are going to be involved in the Strategic Board discussions.

  550. That will give them the access that public interest should require?
  (Ms Jackson) Subject to them retaining confidentiality.

Julia Drown

  551. I know Mr Deegan and Miss Jackson wanted to respond to Professor Pollock's comments, and I would like you to do that, I wonder whether everyone would agree it should be possible for the public who do not understand the 300 page business case to put on one side of A4 why one scheme might look better than another.
  (Mr Deegan) The first point, some comments on Professor Pollock's contribution, teaching facilities and diagnostic facilities are part of the development. In terms of how we communicate the schemes, it is not just to members of the local community it is to our own staff and we will leave with the Committee a recent booklet we have circulated.
  (Ms Jackson) There are two other things we have done, planning on the basis of the needs of the population and in addition, closely followed, we very heavily stressed that we are looking for design quality. That will be a large part of our evaluation when bids are submitted in a fortnight.

  Chairman: Can I on behalf of the Committee thank you all for a very interesting session, we are most grateful. We may well follow through with some written questions and we would appreciate your cooperation in responding to these. Thank you very much.

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