Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 1040 - 1059)



Mr Amess

  1040. On health care, which we debate all the time. I just want to get on the record what is the correct figure?
  (Mr Milburn) Our commitment is that we will have health expenditure in this country at the EU level. That is precisely what we will do.

  1041. Which is what?
  (Mr Milburn) At the moment I think it is 7.9 per cent across the EU. By the end of this spending review period, the current spending review period, expenditure on health care in this country will be between 7.6 and 7.7 per cent of GDP. So we will be within a hair's breadth, within shouting distance, of the EU GDP average.

  1042. This does not take into account that GDP will increase in Europe.
  (Mr Milburn) Well, GDP may increase in Europe, health expenditure may well fall. For example, I know that the Germans are overall, as I understand it at the moment, reducing the percentage of health care as a percentage of GDP, that is what is happening there. We are increasing it as you know and actually we have got, I think, the fastest growing health service of any major country in Europe right now. Pretty simple in terms of the numbers, the numbers are right now, the average expenditure on health care in Europe is 7.9 per cent, or thereabouts, by the end of this spending review period, which will be the 31st March 2004, we will be spending here between 7.6 and 7.7 per cent of GDP on health.

Mr Burns

  1043. Just so it is absolutely straight. What you are saying is your target is to come within a hair's breadth.
  (Mr Milburn) No, no, no.

  1044. You said 7.6 per cent.
  (Mr Milburn) No, no, no. I said our commitment is to get to the EU average and then I said that at the end of this spending review period we will be within shouting distance of that. Our commitment is that we will get to the EU average.

  1045. Right. The EU average, but the EU average as it is now, not what it might be because no-one knows what the EU average might be in March 2004.
  (Mr Milburn) Our commitment is to get to the EU average.

  Mr Burns: As it is now.

  Chairman: Can I say we are getting slightly off the ball here.

Mr Amess

  1046. Chairman, can I finally ask what is the source of your figure for the average EU spend?
  (Mr Milburn) The OECD.

  Chairman: We have had a hour on the Concordat, we have other issues to discuss. Are there any colleagues who have a brief final question?

John Austin

  1047. To come back on the private beds issue, and perhaps rather than dealing with this now our Clerk can deal with this in correspondence, albeit we will need the information fairly quickly. It seems to me that the Department of Health evidence we have had suggests that if you take away the amount of extra care that could be purchased by income which is derived from the private beds in NHS hospitals, that you might get better value for money by having the provision of the care available within the NHS hospital.
  (Mr Milburn) Remember that if we were to do that, then we would have to provide the resource for the NHS consultants, for example, leaving aside the NHS nurses, to staff the NHS bed that became available.

  1048. On the figures available it would appear —
  (Mr Milburn) Remember, that at the moment the NHS is not paying the NHS consultant to staff the private patient unit bed, the private sector is paying for that and, frankly, at prices that are well ahead of the prices that the NHS pays.

  John Austin: It might be worth looking at the figures on that.

Dr Naysmith

  1049. Would that be true if the consultant were already paid by the National Health Service? Are you suggesting that if they go and do something in a private unit they will be paid again?
  (Mr Milburn) By and large, that is not the case for a private patient wing as distinct from the pay beds that are scattered around, and remember the occupancy in the pay beds not in the private patient unit is very, very low as far as privately paying patients are concerned, it averages around ten per cent so, in other words, if you have got an odd pay bed on an NHS ward somewhere for only ten per cent of the time is it occupied by a patient that is paying for it and 90 per cent of the time it is occupied by an NHS patient that the NHS is paying for to occupy it. That is a different category. In the private patient unit, or separate wings as they usually are (often, incidentally, run by a private sector operator) the consultant is not staffing the private patient unit in their NHS time. Usually it is being staffed in the private sector's time. I think that is right.

  1050. What would your opinion be—and I want to preface my remarks by repeating what you said as well that most of the consultants I know work extremely hard in the National Health Service and often above their National Health Service contract—of a consultant employed by the National Health Service who because of the position of a hospital or because there was a lack of capacity due to lack of nurses or a theatre has closed down or something like that, did private work in a private unit, even National Health Service work in a private unit, and was being paid again because he or she was unable to operate within the National Health Service because of failings on behalf of the National Health Service?
  (Mr Milburn) On the face of it that does not sound particularly appropriate.

  Chairman: Can we move to the PFI.

Sandra Gidley

  1051. We have had a whole host of what has often been very contradictory evidence during the inquiry, people starting from quite entrenched positions, from the the Unions' and Allyson Pollock's position, which seems to be "public good/private bad" at any cost, to on the other end of the scale organisations like KPMG, where they are arguing that we are not going far enough, as it were. Mr Stone has argued for the removal of "artificial boundaries" from PFIs. He believes that "whole service" PFIs maximise the scope for innovation and value for money. They are also suggesting that the Department of Health oversee some pilot projects which will involve clinical and neo- clinical services to see what further benefits could be provided by the private sector. I believe you looked at a similar scheme when you went to Spain run in a very similar way, owned by the public sector hospital managed by the private sector. Do you have any plans to establish any such schemes in Britain in the near future?
  (Mr Milburn) It depends what you mean by "any such schemes" really. Certainly the one that I visited in Spain was interesting, it is what they call foundation hospitals and I think that there are only three of them that they have at the moment. Essentially it is part of the public health care system and they have a national health service broadly equivalent to ours, although it has greater regional control over it than we have in this country, and it is privately managed and, if you like, the organisation that privately manages it gets a fee for managing it. That is effectively how it works. It is a very modern hospital—very, very new. It has a more very severe case mix, interestingly, than the corresponding group of Spanish health service hospitals but has shorter waiting times. The staff are better paid, although they told me that they worked harder than in the equivalent public sector Spanish hospital. There are some interesting lessons to be learned there. I suppose the closest we have come to that sort of model thus far is the DTC arrangement that we have been negotiating with BUPA that Richard was asking about in Surrey where, effectively, what we are doing, I suppose, is taking a BUPA hospital, and it is going to continue to be managed by BUPA but it is going to be part of the National Health Service. That is what we are doing with it because it is going to be exclusively treating NHS patients and it means, in crude terms, as I was indicating earlier, that we can get more NHS patients treated and hopefully get them treated more quickly. I do not have a problem with that. If you are asking what we are contemplating, that is the only model we have contemplated thus far and it so happens that this came along as an opportunity, rather like the London Heart Hospital, and we decided to take advantage of it.

  1052. One of the controversial aspects that a lot of different agencies face is the staffing aspect and there are a lot of people who are very worried about the fact of where do clinical staff fit into this picture, should they remain part of the NHS. What is your view on that?
  (Mr Milburn) I think, by and large, they should. As I think our first memorandum indicated that we submitted to the Committee before I came before you last time, clearly in the large-scale projects, whether it is through PFI or some other form of PPP that we are seeking to develop, it is probably preferable that you keep doctors and nurses as part of the NHS with NHS terms and and conditions and so on and so forth. I think that is, by and large, what they want. As you know, we are about to trial the retention of employment option in three or four parts of the country to see whether we can apply precisely the same sort of approach to so-called non clinical staff as well. I think that is largely for cultural reasons and people want to remain part of this thing called the National Health Service.

  1053. What would you describe as clinical staff and what as non-clinical staff? In one of the hospitals, I forget which now, the support staff were classed as very much part of the ward team and almost regarded themselves as clinical staff even though on paper it looked as though domestic staff would be a more accurate description. Where would you draw the line between clinical staff and non-clinical staff?
  (Mr Milburn) As you know, we published back in 1998 precisely that differentiation and I am very happy for you to have it, and I think the Committee has had it, which listed where the divide lay between clinical and non-clinical services. However, I also have to say that there are some grey areas between what is clinical and what is not clinical. As you know, part of the purpose behind the retention of employment option has really been to try to reintegrate the services that people have traditionally defined as completely non-clinical, the cleaning services in particular, that are not part of the clinical team, and try to re-integrate those back into the heart of the NHS—for obvious reasons that people nowadays are very worried about—which is where you have had the absolute hard separation between some services being in-house and some services being out-of-house. That has not always contributed to the best standards, certainly as far as cleanliness is concerned. Personally I do not think it is so much the fact that those services were tendered out as the fact that there was not a common management grip on the services. Part of what the retention of employment option is about is to try and get relationships right at ward level between the matron, the ward sister, doctors, the cleaners and the other support staff, so we have some of the basic functions carried out in hospital wards that should always have been carried out in hospital wards which is to keep the standards of cleanliness at a high level.

Jim Dowd

  1054. I do not know if you remember last time when I asked you questions about the PFI, a division bell went and that was the end of the matter. We have had some responses to the outstanding questions so I will not go over that again, but I wanted to look at the question that PFI now is almost a gateway to capital development in the NHS. Certainly everything has to pass through it before it is decided whether they can proceed, even if the decision subsequently is then to revert to the more traditional route. Is that an objective part of its function or is that just de facto what happens these days? Secondly, this time last spring, not quite a year ago, you announced a batch, I cannot remember the number, around about 30—
  (Mr Milburn) Twenty-nine.

  1055. Now there will be different schemes of different range, different volume, different scale, but assuming they are all progressing at around about the same pace, how do you recognise the problem of the capacity of the sector to actually deal with those? Lewisham was one of the schemes last year and I think they have got an excellent case to carry forward but they are now worried that they are going to get caught in the constriction of the system as we utilise it.
  (Mr Milburn) On the first point about the PFI being a gateway, as you put it, I do not think that is a bad thing at all because what it allows us to do is to test, certainly for the big capital projects as distinct from the smaller ones where public sector capital is a perfectly quick and easy way to get the odd ward built and so on and so forth, for decent value for money for the taxpayer. As you are aware, many that have gone through the gateway have passed their value for money test and have gone off as PFI. Some that have gone through the gateway we found do not represent good value for money or affordability and, therefore, we have gone down the public sector route. I think on the stocks we have got 64 PFI projects, major hospital projects, and we have got four non-PFI projects in places like Rochdale and Hull and elsewhere. I do not think that is a bad thing if it brings some discipline to the value for money test in the National Health Service on the capital side. That is point one. I think we will want to continue to do that. There are concerns, which I am sure the Committee has heard and that I am concerned about too, about the time that it takes to get a PFI hospital built from me taking a decision, or even earlier I suppose from the strategic outline case, outline business case, full business case, final sign off, building work beginning, completion and so on and so forth. We are looking, Peter is looking, and I think we will need to look at this jointly with colleagues in Treasury, at how we can take some of the time out of the current PFI process in order to get these new hospitals built as quickly as possible. That brings me to the second and related point that you raise, which is one of the rate limiting factors that we experience in terms of being able to translate announcements about new hospitals into bulldozers and then wards actually happening is the capacity both on our side of the fence and on the industry's side of the fence. At the moment there are very few players in the PFI market. Essentially there are how many?
  (Mr Coates) About a dozen I would say.
  (Mr Milburn) About a dozen players who compete regularly for NHS contracts. Although there are some new entrants coming into the market, and potentially there may be more entrants coming into the market, that limits the management capability of being able to translate very difficult building schemes from paper into practice. As a consequence of that, that is sometimes why you get the delay. I think what your people in Lewisham are probably expressing concern about, although I have to say there have been no decisions taken on the next wave of the ones that are actually going to go ahead, is probably lack of private sector management capacity could limit the number of hospitals that can be built quickly. That is something I think we have got to address very seriously indeed with the industry. In the end I think the way that we will answer that problem is probably by getting more entrants into the market. That might not be comfortable for the current entrants in the market because it will bring more competition to bear, but if it means that we can get more hospitals built and introduces more competition in terms of building more hospitals then we would probably get a better deal for the taxpayer as well.

  1056. Taking it a little bit further, your assessment then is that it is the management capacity. It is not the scale, the volume, the gross amount of money that is involved, it is literally the management capacity and you need similar capacity regardless of the spend?
  (Mr Milburn) The problem is not the money from our side of the fence in terms of the revenue commitments that we make against the PFI projects, because as you know from the figures that the Committee has seen although the revenue commitments of PFI are rising year by year as the number of PFI projects rise year by year, actually in terms of the overall NHS budget it is not a huge proportion, around one per cent of the revenue HCHS budget at present. Nor is it a problem with the cash that the private sector has available to it because, in theory at least, they have unlimited access to cash from the markets and so on and so forth. The problem is the sheer managerial capacity that you have in managing what are very complex projects. UCLH, a couple of miles from here, is a hugely complex inner city hospital replacement and it is going to cost us somewhere between 400 million and 500 million quid. It is vast and difficult, difficult to manage, and there are only a limited number of project managers, leaving aside architects and so on and so forth. It is the project management function where we lack the capacity probably more than anywhere else. I think that can probably only change with time. I do not know whether Peter has anything to add. Maybe as the market matures. Remember, there is lots of criticism about PFI, but the thing to remember about it is that it is a relatively new market. Although a lot of money was spent on PFI prior to 1997, not a single new hospital was built. Now we are getting the hospitals built but it has only just begun.
  (Mr Coates) It is not the capacity in the building market that is the problem, once they have been signed and they start building there is capacity there. It is the skilled teams in negotiating, designing and taking the schemes through to signing that is the problem. That is where the capacity constraint is, both to some extent in the NHS and to a greater extent in the private sector. The major players can only take forward two PFI schemes at any one time in terms of design and negotiation and, given that, that implies you can only actually have six schemes out in the market at any one time because you need at least two bidders for each scheme and there are 12 players in total in the market. That gives you the size of the area of the capacity constraint, I think.

  1057. Is it not misleading to say to all those who were approved in the initial stages last year that they are all off and running? Is it not a bit like the London Marathon, they all start off but it takes them hours to get through Greenwich Park gates before they can actually get on with what they are doing?
  (Mr Milburn) No, because if you remember when I made the statement what I said was that these different schemes, all 29 of them, will come in different waves. This is three, four and five, is it?
  (Mr Coates) Four, five and six.
  (Mr Milburn) The fourth, fifth and sixth waves. I actually said which one was going to be in which wave. What we were quiet about was when those waves would happen. Clearly I want them built as quickly as possible. We have made the announcement, the money is there, both from our side of the fence and I guess the capital is there from the private sector side of the fence, certainly the skills and expertise are there in the building market. Our problem is the logjam, the bottleneck, if you like, around the project management issue. I think that is something that we need to try to jointly resolve between Government, including the Office of Government Commerce, ourselves and the private sector because it would just be anomalous for me if we have a situation where we can build the hospitals but we have got a specific skills shortage that means that you cannot do it immediately, we should be getting on with it as quickly as possible. We are looking at that issue and as far as the local issues are concerned I will come back to you in due course.

Dr Taylor

  1058. Can I move on to risk transfer, probably to Mr Coates to allow you to finish your tea. It has become clear that it is the risk transfer figures that make PFI into value for money. How do we answer critics who say that the risk transfer is uncertainty, unprobability and it is not a science? That is the first question. The second one is risk transfer is only beneficial if it is actually enforceable. How can it be enforced? At the worst scenario, what happens if the same happens as happened in Railtrack?
  (Mr Coates) It is true that the only way to test an assessment about whether it is right to build a PFI or with public funds is to build two together and then work out which one is the cheapest. What we do is we analyse how costs escalate and there are time overruns on publicly funded projects. We do know that almost inevitably there are cost and time overruns in public schemes. It seems to me that it is not a probability, it is a definite occurrence. The larger the scheme, the greater the likelihood that it will be at greater cost and take greater time.

  1059. So some of the risk is not a risk, it is a certainty?
  (Mr Coates) Yes, it is not all simply probability.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 15 May 2002