Examination of Witnesses (Questions 1080
WEDNESDAY 9 JANUARY 2002
MP, MR ANDY
1080. There are still some A business case,
which runs to thousands of pages, does not help the public to
understand what the difference might be between the two options.
You mentioned previously how you are keeping confidential the
public sector comparator, I assume that is only until you get
the bids in. What steps are you taking to try and make the process
more transparent so that people can understand the difference
in terms of risk transfer and understand what risk has been transferred
so that they can understand the differences between the different
options and so they can see what is being offered to them as future
patients of their local hospital?
(Mr Milburn) I think two separate things are necessary.
First of all, I think it is already true to say that when a hospital
is built through the PFI there is more openness and more transparency
than there is as if the hospital were built through the exchequer
route, more publication and more information, some of it, as you
say, running into many hundreds of pages. Remember the SOC, the
Strategic Outline Case, the OBC, the FBC, all of these, have to
be made available, they are all placed in the local library, they
are all given to the local health council, they are all given
to the House of Commons library, and so on and so forth. Point
one, transparency there is. Point two, understanding, probably
there is not. I think it would be hard to sustain an argument
that somehow the PFI is a secretive process. I think it is far
from secretive, it is tremendously open actually and there is
a lot of information published. When we came into office we insisted
that a lot more information be published than had been the case
in the past. The issue is much more about what the public understand
about PFI. There, I think, there is a real job of work to do.
Frankly I think we have been at fault in government in allowing
arguments to go by default and allowing some of the ideologues
under the pretence of objectivity frankly to adhere pretty subjective
an erroneous view as to what the PFI means. I think we should
engage in the argument, as we are now, and win the argument with
the public about this. That should happen not just at a national
level but at a local level too.
1081. I have asked a number of witnesses who
have said that it should be perfectly possible to put on a page
of A4 some of the basic arguments. Would it not be helpful for
the public to see that if you were transferring risk the public
sector comparator would most often be cheaper? That admission
is true in most of the House of Commons' documents that we see,
that is the case. Then the public would see what they know to
be true, that borrowing through the private sector is more expensive
than borrowing through the public sector. It is only when the
other things come in that the real advantages come through. Being
honest and open and more transparent about that might get through
some of the muddy waters that we have seen in our inquiry.
(Mr Milburn) Peter will correct me if I am wrong about
this, but I do not think there has been any lack of transparency
about the fact that obviously Government can borrow more cheaply
than the private sector, can we not, Nick?
(Mr Macpherson) We certainly can.
(Mr Milburn) But there are compensatory factors and
the risk transfer and some of the issues that we have been discussing
around maintenance and time overruns and cost overruns and so
on and so forth make the PFI a better deal. I think it has not
been the lack of transparency. We have allowed ourselves and allowed
the whole PFI process to be transparent, and by "we"
I include the private sector because I think the private sector
has got to get involved in this too because it does not do the
private sector any good to have various organisations erroneously
publishing, frankly, rubbish in newspapers and elsewhere about
new hospitals in Carlisle and Durham and so on and so forth. I
think there is a real argument to be engaged in and all I would
say at this stage is that is something certainly I will be doing
and I think more generally we will be doing in conjunction with
our private sector colleagues.
(Mr Coates) We did try this process once at Norfolk
and Norwich where we produced a summary of the contract rather
than the contract itself with in layman's terms what each clause
meant and we were unfortunately accused of being secretive because
we did not release the contract, we released just a summary. Whatever
you do you seem to upset somebody.
1082. You could release both.
(Mr Coates) Yes, perhaps we could release both.
Chairman: We have got a vote at some point in
the future, I hope we can cover a few more areas before then.
1083. Looking at staff transfer, it seems to
me from our visits that the biggest controversy, and we can all
talk about financial policies and we can get justification for
our view about PFI from those, but at the heart of it for large
numbers of people in the public is the distrust about transferring
into the private sector of some support services. It was those
elements that I think caused an awful lot of trouble for Carlisle
and Durham in their local press and all the rest of it. I want
to ask about progress that has been made on three pilot schemes
on the Retention of the Employment Model at Mandeville, Roehampton
and Havering. How is it going?
(Mr Milburn) Well, it has started. It is incredibly
difficult. I think I said to the Committee last time that this
was not an easy process, which has been going on for some months
now, for six months or more. Where we have got to is the union
representing most of the support staff, UNISON, agreed in principle
with the Retention of Employment option back in November in outline.
We are going to apply it to five groups of staff, to portering
staff, cleaning staff, catering staff, laundry staff and security
staff. I think there are different views about it. I do not think
necessarily the private sector, and you will have heard from Norman
Rose and others, is wholly comfortable with it, nonetheless they
are prepared to engage with us on it and we are doing it as a
tripartite process between Government, the unions and the private
sector to try to make the thing work. Peter has been leading it
and so far, so good, but it is pretty difficult.
(Mr Coates) We have drafted the contractual terms
to enforce the change and it is envisaged that we will oblige
the contractor to apply all NHS terms and conditions to all seconded
staff on behalf of the trust as an agent of the NHS. We have had
the initial comments back from the private sector in terms of
what it means to them in terms of changing their risk profile
and there is obviously going to have to be a bit of boxing and
coxing now between what they say they would like and what we say
is a reasonable claim. They will then go out to get price bids,
I should think, by the end of January, beginning of February,
and by the end of March we will know for sure that it is going
to work in terms of value for money incentives to the NHS.
(Mr Milburn) If it does work, if on the basis of the
three, and there is another one we have added, Waldesgrave in
Coventry, largely because its timetable for procurement comes
hard up against the Retention of Employment pilots, so there are
four rather than three, if we can make it work then our intention
is to apply that as a matter of principle to all PFI deals in
1084. Mr Rose came to the Committee and said
that he was not involved in the negotiations on it and that his
organisation had been excluded. I wonder, if that is true, why
that was the case? How would you counter his argument that such
a model would in itself be divisive in that people would have
two sets of bosses: one who manages and one who pays?
(Mr Coates) I cannot understand why Norman would say
that he was not consulted. The day after the trade unions accepted
the package I met with Norman and representatives of the trade
from all the private sector bodies in a large meeting in London
and Norman was able to put his views across to me very forcibly.
1085. I think he might have envisaged being
in before the agreement between the Government and UNISON.
(Mr Coates) I am not sure I accept that either. We
consulted closely with the private sector on all forms and Norman
may feel he was not at the centre setting policy but he was certainly
consulted about the way we would implement policy.
(Mr Milburn) I think the BSA had a rather different
policy in mind, it just does not happen to be the policy that
we decided to adopt. Nonetheless, I think the relationships are
cordial and they are involved. Indeed, if the thing is going to
work it has got to be on the basis of agreement with the private
sector and the unions as well.
1086. What about his concern about the issue
of divisiveness between the two sets of managers?
(Mr Coates) There is that. I feel it is an area that
is manageable within the contract. What we are saying to the private
sector is we understand they have concerns about how they manage
the risks in the contracts and one of the problems with UNISON,
in fact, was about what is a manager because it is key to the
whole process of who manages the risks in the contract. There
is a difference of view between the private sector and UNISON
as to what is a manager but essentially we have agreed with the
private sector that to manage the risks in the contracts they
must employ all those who manage those risks and that, generally
speaking, means those of supervisory grade and above. They will
then be transferred across to the private sector to be employed
by them. It seems to me that they have to have a very clear understanding
of who their boss is. As far as the staff are concerned, in reality
there is no difference between what they were before the contract
was signed and afterwards because the same manager they had before
the contract was signed will be in place afterwards because all
the staff are in effect staying doing the same contract. I see
no insuperable obstacle to making it clear who managers who. I
think the trick will be making sure when disciplinary action is
being considered against any employee that both the private sector
and the trust know exactly what is going on and the prognosis
for that action so that nothing can go on and be a surprise to
the trust if, for example, the worst case comes about and the
decision is taken to dismiss an employee. That prognosis is a
very important part of the relationship to be built up with the
private sector in terms of what is happening in the disciplinary
code, how the people are to be managed, are they being fairly
managed and what are we doing about discipline and other written
and verbal warnings.
Chairman: Can we turn to LIFT and try and touch
on one or two issues that we want to raise there.
1087. LIFT. Something obviously had to be done
to improve the physical, as much as anything, stock of the surgery,
particularly in inner city areas. There have been six pilot schemes.
What I certainly found quite alarming when we were taking evidence
was that there has been no evaluation, in effect, of those pilot
schemes, indeed some of them were ended before the further LIFT
projects were initiated. What is the point of a pilot scheme if
you are not going to evaluate and improve for the future?
(Mr Milburn) They are not pilots. In fact I have announced
the second wave today of 12 further initiatives. We are just getting
on and doing this. The reason is, as you quite rightly say, primary
care in too many parts of the country, particularly the poorest
parts of the country, is appalling. 40 per cent of GP surgeries
are purpose built, virtually the remainder are either adapted
houses, residential buildings, or adapted shops, and we expect
modern primary care to be carried out in those circumstances.
80 per cent of the accommodation is too cramped to meet modern
requirements now. There is a very simple option round this, what
we can do is continue to dole out penny packets of public sector
cash, which is rising year by year, big investments going in,
or else we can do what we are doing through NHS LIFT, which is
an attempt to lever through cooperation with the private sector
enormous sums of cash into deprived inner city communities, like
Newcastle and Bradford. The ones that I have announced today are
places like Barking and Havering, Birmingham and Solihull, Bradford,
Cornwall and the Isles of Scilly, there are huge problems there,
Coventry, East Lanarkshire, Hull, Leicester, Liverpool, Sefton,
West Kent, North Staffordshire, Redbridge and Waltham Forest.
If that is the choice then we are going to go for the latter option.
Already I know from my own visits in Newcastle the ground clearing
work is producing results. There is quite a lot of enabling going
into these schemes, allowing old surgeries to be knocked down
and land to be acquired. In Newcastle and North Tyneside alone,
which is a very small city of 300,000 to 500,000 people we are
going to be spending somewhere in the region of £25 million
to £30 million on new primary care infrastructure alone,
that is a huge investment going into an area that frankly has
not had the quality of primary care premises that it needs. That
would not happen were it not for cooperation with the private
sector. I am not saying that you are saying this at all, this
sort of fallacy that one sometimes hears, and you will have heard
during your hearing, about all things public being wonderful and
all things private being dreadful is, I am afraid, not borne out
by the facts. What we need is more of a relationship between the
public and the private sector in order to get better care, improved
premises and shorter waiting times available for more NHS patients.
1088. I cannot argue with the aims. Certainly
I think we were all under the illusion they were pilots schemes.
How are the schemes going to be evaluated so that if there is
anything wrong we can quickly make sure? I am still slightly alarmed
that we may not have got it right and we need a little bit of
time to make sure we get it better.
(Mr Coates) The first schemes will be slightly novel
and contentious. The first step will be sharing those with our
Treasury colleagues. The assessment will be a standard business
case assessment that will look at both the numbers and the quality
so that ultimately the prime test will be what numbers come out
and are they providing value for money for the taxpayer. We will
also look at the softer areas and the qualitative areas around
how much money is levered in and how we improve if there is a
step-change in the local quality of accommodation rather than
gradual increase and does it increase and improve the mobility
to attract GPs to the area. Obviously in inner city areas they
do have problems attracting GPs. All of those factors are taken
into consideration in looking at the business case.
1089. Some inner city areas find it difficult
to attract GPs, how will schemes in these high costs or risky
areas where you get your windows bashed in frequentlyand
we have to admit there are areas like thatbe dealt with?
Maybe there is a reluctance on the part of the private sector
to take on the risk in those schemes and there is a balance between
wanting to provide something and people there who are willing
to provide it at the right price.
(Mr Milburn) The evidence thus far is, certainly the
enabling works I saw in Newcastle, which has its fair share of
problems as an area, were in part at least about better security
grills, and heaven knows what, around health centres and surgeries,
and so forth. In terms of the relationship between NHS LIFT and
PPP round improving primary care premises and primary care recruitment
I think there is a very strong relationship indeed. If you are
asking GPs to go and work in difficult areas in any case and then
asking them to work in cramped, dirty, out of date accommodation
then your chances of doing so are practically zilch. Very often
through the current arrangements what we also do is compound the
felony by asking GPs to then enter into very long leases with
the current private sector owners of the premises. One of the
beauties about NHS LIFT is we will able to offer, particularly
younger GPs in inner city areas, more favourable and more short-term
leases. As we discussed in the committee in the past there is
a behavioural change that is affecting not just primary care doctors
but I think it is happening in the whole of the public sector
where people no longer want to make commitments for life, they
want to change careers midway through their 30s, 40s, 50s, or
whatever, and the idea that we can ask them to be bound into a
contract for life, a lease for life, it just does not fit with
what we need to achieve in terms of recruitment. One of the real
benefits of NHS LIFT would be better leases, more flexible leases,
more favourable leases precisely in order to attract GPs into
the areas where they are needed most.
1090. What I am not really clear on is what
is the criteria for deciding which areas have them. There are
some affluent areas where there are pockets which are more deprived
but they often seem to miss out. All of the areas you described
are what I would describe as commonly thought of as being more
(Mr Milburn) We have looked at the issues round deprivation,
we have looked at the issues round GP coverage and the issues
round the existence of the primary care premises and we basically
came to decisions on that basis. The first six were Newcastle,
Bradford, Manchester and Barnsley, Sandwell, Camden and Islington,
East London and the City, which were very much the hard-core as
far as the state of primary care premises were concerned looking
at those sort of factors. The next 12 also have problems round
recruitment and the current state of primary care. Then we will
move on to further areas in due time. Overall we are hoping that
the PPP will lever in about 1 billion of investment so that we
can modernise 3,000 GP surgeries and build about 500 new health
centres. I think in the latter category there will be an enormous
gain for patients. What I hope we can do is that rather than having
the optician in one place, the dentist in another, the social
worker in a third place and finally the GP we will have them all
under one roof. Remember, the patients who are going to take advantage
of these services very often live in inner city derived communities
and do not have their own means of transport, and making four
or five bus journeys is the last thing we want them to do. I think
this is a very important development. I also think it is a very
important part of the argument about the modern relationship between
the private sector and the National Health Service being for the
benefit of NHS patients, and being precisely for the benefit of
the poorest NHS patients.
1091. Again I think there is a danger here that
the private sector will gravitate towards the areas which Ms Gidley
raises, the more prosperous areas and the areas where there is
more deprivation they may not want to naturally locate. Will PCT
have the freedom to be able to galvanise a catalyst to initiate
a LIFT scheme so they can bring together different primary care
providers on an individual site or do they need to work through
(Mr Milburn) NHS LIFT is a national project which
is precisely designed to address the inequalities in provision
that we all know about. The existing way of providing primary
care premises and providing primary care positions, GPs, has been
to gravitate more and more resource crudely to the leafy suburbs
and less to the inner cities. We know that the biggest health
needs are in the latter rather than the former. The leafy suburbs
do pretty well out of the existing arrangements, which are partly
private sector led. What this is all about is trying to address
the balance and making sure, again through innovative PPP arrangement,
we get more resource and more capacity into those parts of the
community which need the most.
1092. Can you envisage a situation where NHS
capital would be made available to health park type schemes, where
you are bringing in a different range of providers into a new
range of premises? Will there be a budget available to PCTs.
(Mr Milburn) PCTs will have that. I know in my own
local area the GP practice is building bang opposite my office
in Darlington a new PFI health centre, surgery, and they are doing
that in conjunction with the local health authority. Remember
that PCTs are going to get direct access not just to revenue but
to capital resources too and it will be for them to decide. If
they want to develop a PPP to build new health centres and new
GP surgeries then that is a matter for them. I do not think what
we will be doing is providing penny packets of cash for particular
areas in the way that maybe you are thinking about.
Andy Burnham: Just finally, I think the LIFT
scheme is extremely important and I think it is a way of making
new facilities available to the public very quickly given that
they are far less complicated than hospital buildings.
Chairman: We will have to adjourn at that point.
Can I thank you and your colleagues for a very helpful session.
We have a series of questions we have not asked, perhaps we can
write to you in due course. We are very grateful for your co-operation.
Thank you very much.