Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)




  1. Good afternoon and welcome to the Committee of Public Accounts. We are very honoured today to be joined by Mr Jozef Stayl, who is the President of the Supreme Audit Office of the Slovac Republic. We welcome Mr Crisp, who is going to be talking to us about the management of surplus property by trusts in the NHS in England. Before we start, Mr Crisp, can I raise one point with you. Following our hearings on 19 November and 14 January you promised us notes and we are still waiting for these notes. This makes it very difficult for us to produce our reports. Do you think we could have them?

  (Mr Crisp) My apologies, Chairman. In fact, you have got all the notes apart from one particular question delivered today. I appreciate that is late, so my apologies.

  2. Thank you very much. Would you like to introduce your colleague.
  (Mr Crisp) Could I introduce Mr Peter Wearmouth, who is the Chief Executive of NHS Estates.

  3. Would you like to start by turning to Page 13 of the Comptroller and Auditor General's Report and looking at Paragraph 2.5, where you see that 18 per cent of the trusts had no estates strategy, that is about a fifth. If you go over the page to Paragraph 2.9 you will see that a fifth have still to meet the NHS Estates' exemplar standards. How are you going to ensure that strategic planning improves and when?
  (Mr Crisp) There are three or four points I would make. The first point is that the very big issue here is are we achieving value for money through the disposals of the estate, and this Report shows that indeed the NHS is doing that, which I think is extremely encouraging. However, we need clearly to improve some of the processes. The actual facts are that as of April 2000 every trust was meant to have an estates strategy and from that date as well we introduced arrangements for exemplar strategies. At April last year 82 per had achieved it, which is the figure to which you are referring. That would have been higher if we had not been involved in some reorganisation at the time, so there are a number of these trusts which are just going out of existence or indeed a number just coming into existence. The same is true at this year end so the figure is of the same order right now. However, I believe we are now entering a period of organisational stability and so our intention is to see 100 per cent by December of this year. In terms of sanctions there are two. The first is how do we help people to achieve it, and that is very much the job of Peter and his colleagues in NHS Estates, where their role is to help and support people in developing the estates strategies. In terms of what we are doing where that is not happening, we have two strategies. One is the traditional management performance process of holding people to account and reminding them of their targets and helping them to achieve their targets where they can, but probably the more powerful role in this particular instance is that people do not get investment plans unless they have an estates strategy. It is a very simple mechanism.

  4. Perhaps I could ask Mr Wearmouth to turn to Paragraph 2.14 where we read the NAO "found that only 66 per cent of NHS trusts in our survey complied fully with the guidance." It seems extraordinary that a third of trusts are not following your guidance to review their estate annually. We are talking about a very important subject here. We are talking about possibly one of the largest, if not the largest, estates in the world. I find it rather strange and I am sure my colleagues find it rather strange that such a large number of trusts apparently have no strategy to review their estate. You would have thought that would be the first thing they would do.
  (Mr Wearmouth) If I can outline when the guidance was actually issued to carry out an annual review of the trust estates and, secondly, look at the timescales and dates that the NAO review took place and then look at the board level report and how we can performance manage NHS trusts in the delivery of estates strategies. Guidance was issued in mid to late 1999 to come into effect in April 2000. This coincided with the NAO survey that was being undertaken. An estates strategy is essentially a five-year forward look into how the trust itself can deliver its assets to provide health care and, as such, 97 per cent of trusts did say in the NAO Report that they had reviewed their estate. We do request in the guidance that was issued in late 1999 that a control assurance statement is signed by the trust accounting officer who acts on behalf of the board to make sure they have done their reasonable best to deliver an estate that is fit for purpose. We will ensure that that is taken forward by performance management and by reviewing with strategic health authorities the performance of NHS trusts in delivering estates strategies. I think we have tried to put in place a strategy that will deliver an annual review by NHS trusts of their asset base. 97 per cent of trusts did state within the Report that they had carried out a review.

  5. If you were going to come back here in two or three years' time, you would be able to convince us that you had a successful strategy to ensure that all these trusts have identified property that is no longer required and that they are freeing it up for the wider benefit of the NHS?
  (Mr Wearmouth) 97 per cent of trusts have undertaken it now. The question is should they undertake it on an annual basis.

  6. Exactly. And you will ensure that?
  (Mr Wearmouth) Yes.

  7. Thank you very much. I wanted to refer you next to Section C, Pages 18 to 21, that is liaison with local authorities. I was going to ask a general question about that but since then the question of Napsbury Hospital has come up which is just an example. Mr Peter Lilley has raised this with me. This was a sorry saga where because of lack of liaison with the local authority literally hundreds of thousands of pounds were wasted. I accept that it was not necessarily the fault of the NHS; it was perhaps more the fault of the local authority changing its mind, but what lessons have you learned from Napsbury to try and ensure that this does not happen again?
  (Mr Crisp) Let me make two points and ask Mr Wearmouth if he might add into that. One of the big things about Napsbury was that it was big and complicated. It was very important that we as the NHS did take it to planning appeal. As you know, at the beginning of the process the land was valued at £10 million and having got the planning approvals it was valued at £66 million. There was at a simple level view a very important lesson to the NHS about being really professional and proficient in our evaluation and assessment. That was a good example of that. The bit that is depressing about this is that it took a long time to go to a planning appeal at some considerable cost, although we won the planning appeal. Whether getting a better relationship with the local authority and better liaison with the local authority at an earlier date would have made any difference or not, I think it is quite difficult to tell within that. Again, it makes the simple point that the more we in public service are working together on issues and looking together at the issues, the more fruitful it is. Those are the two general points. We must be extremely professional, as we were, and, secondly, we must work better with the local authority. On the specifics Mr Wearmouth may be more familiar with the example.

  8. It is always better to proceed by way of practical examples. If there had been better liaison with the local authority, how much money could you have saved on planning issues? The figure I have been given is that up to £800,000 was wasted in this process in one hospital.
  (Mr Crisp) The figure I am going to give you is the same one. £1.1 million was the cost of the planning appeal and we got £340,000 back. So you are right.

  9. Can you give us reassurances about the future in terms of better liaison with the local planning authorities?
  (Mr Crisp) You cannot legislate for every case. There are personalities and individuals and individual circumstances and so on. This Report from the National Audit Office reinforces the importance of NHS/local authority relationships. It does say that most trusts—and again I will try and bring Peter in here—have a good relationship and they do work together. Some of the recommendations are saying, effectively, that 100 per cent of NHS trusts and 100 per cent of local authorities need to be in close liaison all the time, which is probably unrealistic given the fact that many trusts and NHS organisations, PCTs, will not have large estates disposals or planning issues all the time, but when they do—and Napsbury is a classic example—you need to have prepared the ground for some time. We do give people very clear guidance around that. Can I leave the slightly more general point to Mr Wearmouth.
  (Mr Wearmouth) I think it would be true to say on Napsbury that it cost the NHS £800,000 but the site was valued at some £66 million as opposed to the £10 million it was valued at if we had not gone to appeal. That might not be the right answer in terms of joined-up government but it does show that the NHS was right in trying to achieve value for money by going to appeal in that particular situation. If I can look at how we work with local planning authorities, this particular Report is focused on estates and town and country planning matters. It would be true to say that we do need a close relationship between our local authority colleagues and delivering the health and social care agenda. Although the NAO Report did state that around three-quarters of trusts reported moderate to good contact with local town and country planning officers within local authorities, there is a need to bolster that and ensure that we do have a better working relationship. It is not just at local area, it is at regional area and on the national scene. When property has become surplus for the NHS and the NHS wishes to dispose of it, it follows a different procedure than it would normally follow in delivering health care services. There is a Green Paper on planning that is in preparation at the present time. It states clearly there is a need to update the town and country planning process. It does point out that local authority town and country planning officers feel they are over-stretched and in some instances we have undertaken work in development briefs to assist them in bringing forward land sales for disposal. We are taking on board the points that were raised in the Report about good practice and putting this on a website and we have prepared some guidance for local authority officers and NHS trusts about the relationship between NHS modernisation and local authority development plans.

  10. Thank you, Mr Wearmouth, for that very full answer. When my colleagues are asking questions, just try and keep the answers a bit briefer if you can. It does not matter so much for me but they are time-limited. Thank you for your consideration. Can I ask Mr Crisp about these out-of-date valuations. This is mentioned particularly on Page 24 at Paragraph 3.8. Obviously this is going to affect what the NHS gets on sales and it is quite an important point. If you look at Paragraph 3.7 on Page 23, on average, sale prices exceeded valuation by 32 per cent. What do you plan to do to make sure that valuations reflect the true worth of surplus NHS property?
  (Mr Wearmouth) We do require valuations of all property disposals before marketing commences but, as the Report states, there can be instances where these valuations become out of date. What we agreed to do is to accept the Report and we are looking at (prior to marketing) having high and low valuations dependent on what opportunities there are for the land. During marketing if planning consent is granted or there is another a material change, we will look at carrying out another valuation. Finally, if marketing takes longer than six months we will do another valuation as well.

  11. Thank you for that. To wind this up, can you turn to Page 25, Paragraph 3.15. It says there that cutting six months off sales taking over 24 months would have brought forward receipts of £80 million. Can you tell us a bit about the improvements you intend to make in the future to get value for money?
  (Mr Crisp) Very briefly the context. Firstly, the Report demonstrates that we do get good value for money. Apart from the cases where we have had to give prior consideration, there is only one case where we have not achieved or bettered the district valuer's valuation and that is only by £800. What is noticeable about this group that is referred to here is that what the Audit Office has done is to take those that have taken more than 24 months. Most sales should be done within that period and indeed most sales are done within that period. What happens with those over 24 months is that there are often exceptional circumstances. They may be particularly big sites. Napsbury is an example of that. If you look at the Napsbury example it took some years to sell but in fact the marketing bit of it was only a relatively small part of it. On these complex and longer term sales we need to look at them one by one and in doing that to then pull out the lessons. I do not think the Audit Office is arguing that you could bring forward all of these sales to two years. The maximum date we are meant to do them in is within three years. It also says in some cases you may not want to bring them forward because that may affect the price. The issue here is let's look at them all one by one and see if there are particular circumstances. In these long and complicated sales, I think they are long and complicated.

  Chairman: We had better break there for ten minutes for a division.

  The Committee suspended from 16.21 to 16.27 for a division in the House.


  12. Perhaps we will start then. Mr Crisp, there has been a very substantial reorganisation and we all have our own constituency experiences. How are you going to ensure that these new strategic health authorities and new primary care trusts are going to be able to handle the estates in the way we would all like so they know the property they have and they are getting the benefit from it as efficiently as possible?
  (Mr Crisp) There are two things. The first point to make is that NHS Estates still exists and their role is still there to support people and they will be working through into the 28 strategic health authorities around the country. We have got a back-up mechanism. The second point is that this sort of report means that we need to make sure that we draw people's attention to this more than we have perhaps done in the past. This report is useful in doing precisely that. I suspect that as we devolve responsibility more and more to the 300 primary care trusts—they will be the people who will be the primary landowners within this—that we will get more local aspects and much better joined up locally. The strong safeguard is that we have a mechanism which has demonstrated itself in working with NHS trusts that it will work in the new world as well.

  Chairman: Thank you very much. Mr George Osborne?

Mr Osborne

  13. Mr Crisp, people go into the Health Service because they want to be involved in improving the health care of people in this country. They do not really go into the NHS to be estate agents and property managers. Is there a danger that really people's attention in the NHS is not hugely focused on this area of the behind-the-scenes, rather dry stuff of the Health Service?
  (Mr Crisp) You are absolutely right, that has been the traditional position. I hope the first bit of your statement is the current position, that people are going in there to make a difference to health, but that means that we as an organisation need to buy in support where we can, we need to get support, and we need to build up NHS Estates and other parts of our organisation to make sure that these services are there. The one structural thing we have done that is worth drawing out is we have introduced these new arrangements for controls assurance which is something which chief executives have to sign off at the end of every year saying how they have handled a whole lot of infrastructure, accountancy, probity-type issues. We are putting on chief executives' agendas estates, fire, health and safety, all of those sort of things, which in the rush towards improved clinical services can seem second order, but which are fundamentally important. We have got that structure as to what chief executives are there for.

  14. Has there also been a tendency in the NHS to regard selling off assets as like selling off the family silver?
  (Mr Crisp) There may have been. It is hard to answer on behalf of the NHS on an attitudinal point. However, we did identify a very substantial amount of estate which we put into this retained estate in the 1990s which was clearly identified as surplus. If you look at the land and property we have been selling off, you will see that most of it is associated with change of policy. A significant amount is about large mental institutions and is where the money has come from. I think that what we have been doing is sensibly restructuring the estate around the new service.

  15. It is just that I have read an article and indeed a researcher of mine has spoken to a chap called Mr David Jones, who is the Chief Executive of the Association of Health Asset Management. He says: "Within trusts, precious few people understand asset productivity and those that do understand it do not care. The focus is on `do we have enough?' rather than `do we have too much?'" Do you think he is fair?
  (Mr Crisp) It does not in the least surprise me that people in the NHS do not understand concepts of asset productivity in any technical sense. People in the NHS at all levels do understand it in the practical sense of trying to get the best out of their beds and their wards and their property and so on. Where we have been getting better is in how we make that happen professionally. That, as I say, is by becoming more professional in how we manage our assets. We do not need everyone to understand the professional detail, we need Mr Wearmouth and his colleagues.

  16. In his article in the Health Service Journal he says that there is a gulf between the Department of Health's policy and action at local level. "There is a whole section on Estatecode about getting the most out of the asset base, but when you get down to the ground not many people know. It is not a subject that gets to the top of the management agenda. There may be top level interest (I guess he is referring to you) in rationalising the asset base, but when you get down to the ground there is a knowledge and ability gap."
  (Mr Crisp) I do not recognise the quotation or recognise what he is trying to do in this particular article or whatever it is.

  17. I will buy you a subscription to the Health Service Journal.
  (Mr Crisp) That is very kind of you. There really are two points here. The first is does the trust board understand it. I do not know whether he thinks that is people at the top or whether that is people at the grass roots, but the important thing is that the trust board is the people who have responsibility for the utilisation of all the assets. The important thing is that we get the expertise there, not lodged in Richmond House but there. I would not expect it to be lodged at the ward sister level. I do not know what this chap is talking about and whether he is saying it is not even lodged at trust management level. I believe it is increasingly lodged at trust management level.

  18. And you are satisfied. Can I turn to another part of this Report. I want some clarification here. On Page 8, Paragraph 1.6 of this Report it says that £600 million as of April 2000 remains as part of the retained estate, ie, the bit that was not given to trusts. Why has it taken so long for the NHS to dispose of it? This was property which at the time five or six years ago was deemed as surplus to requirements and property soon to be got rid of, so why are you still holding on to more than half a billion pounds' worth property?
  (Mr Crisp) There are a number of reasons for that. One of them is that quite a lot of that which was declared surplus was still in use for the time being. Whilst they were declared surplus in the period 1991 to 1994 roughly, some of those properties were still occupied by trusts in the short and medium term. There was an element of that that was straightforward. There is also the important point about how we planned those sales both so as not to flood the market but also to provide income over the period. A set of targets was set each year from—and Mr Wearmouth can check for me—some time in the mid-1990s each year we have reached those targets for sales. So actually we have been selling it at the pace we planned to, just slightly ahead of the pace we planned to.

  19. How much of this £600 million retained estates are from empty buildings and how much is from places that are still being used?
  (Mr Crisp) Can I ask Mr Wearmouth to answer on that.
  (Mr Wearmouth) Out of a thousand non operational sites that are identified within the Report, 30 per cent are still actually operational, that is about 300 still operational. We have sold 370 of those particular sites, about 180 are on the market and the remaining 15 per cent are either to be marketed or have other issues that surround them, for example town and country planning issues. Predominantly the majority have either been sold or are still in use.

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