Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 180 - 189)



  180. Are you running a sort of audit between a typical Treasury-funded new hospital and a PFI hospital, to see whether there are big variations in the cost in delivering services to that hospital?
  (Mr Coates) At the moment, no, we are not, but we are working on proposals for a form of best value in the NHS that will require us to benchmark all services in the NHS, in order to determine whether services provided both in state-funded hospitals and private-funded hospitals are the best value for money.

  181. And are you going to compare them directly without putting in some sort of risk transfer factor that nobody understands but always comes out in favour of whatever you thought of in the first place?
  (Mr Coates) The risk transfer factor is a different calculation.

  182. Yes, I know. It is a striking bit of . . . But you are not going to put in a sort of magic figure when you do the comparison?
  (Mr Coates) It will be difficult to do, because if you look at a hospital that was built in the 19th century and one that is built in the 21st century, there is—

  183. No, I said comparative new hospitals, some built under PFI and some built under Treasury funding, there should be some about, just to check that we are not being ripped off. Because, clearly, I am very concerned for the public purse, and it strikes me that we have been handing over very lucrative contracts to people, with very little hold over them?
  (Mr Coates) I was not trying to avoid your question. I was simply saying, yes, we will be doing that, but it will be very difficult because of all the different criteria that are involved.

  184. Life is bound to be difficult, that is why we complain so much.
  (Mr Reeves) Can I make one point, and it just adds to what Mr Coates said as well, and that is about, in a way, you have a PFI consortium and they represent various elements, there are bankers, there are construction people, there are architects, there are facilities managers, and I do not want the Committee to think that everything we sign in the PFI contract is very, very long term. As Mr Coates quite rightly says, for instance, regarding the facilities management, there are short-term contracts, reviewable, at various break period of times.

  185. But, your first point, surely you were right, because we were quite specifically told that there were 60-year contracts with a 30-year break clause, and you were in the hands of Mr Tarmac rather than an NHS Trust.
  (Mr Reeves) The point I was going to make was, we always have been in the hands of Mr Tarmac, whether it be Exchequer-funded or PFI, and the loan debt that we were talking about before, this trust debt remuneration, whether it be interest-bearing debt or public dividend capital, is a reflection of Exchequer capital, we have borrowed to fund Exchequer capital schemes over the past; and that has been debt payable over 60 years, so in terms of timescale, that is long term as well.

  186. I am sorry, Mr Reeves, I thought the whole point of PFI, and the only reason why it got out of the public borrowing requirement rules, was that it was a package that included a service, and that that service was provided by the people that produced a package. So you are, effectively, tying yourself in to a service provider, and the thing that concerns me is that the pattern of service that is provided within a hospital will change, certainly within five years, and, well, 30 years, it is ridiculous?
  (Mr Reeves) I still come back to what I say. The unitary payment, you are absolutely right, is a reflection of various components, that is the funding of the capital to build the hospital and also the operational and the service content of running the hospital, and I accept that is in the unitary payments. But that is why we have an initial concessionary period and a secondary concession period, because the first 30 years is effectively funding the capital, the remaining 30 years is the ongoing situation in terms of the service contracts. But even given that fact, the point I have just made is, the operational service side is still reviewable at regular intervals, in exactly the same way, so in other words, if St Mary's Hospital on the Isle of Wight wanted to get rid of somebody, they can do so under an Exchequer scheme, they can also do so under a PFI scheme. That does not breach necessarily the fundamental arrangements between the overall consortia and the individual trust, it reflects a sub-component within that arrangement.

Mrs Gordon

  187. Is part of this equation the pay and working conditions of the staff who transfer to a PFI hospital? We are in precisely this situation, the bids are in now, they will be transferring from the old hospital to a PFI hospital in four or five years' time, and I am concerned about the people who will move and how they will be treated?
  (Mr Coates) The pay of people who transfer across from the NHS, indeed, all their terms are protected under the TUPE regulations.

Dr Brand

  188. For a few years?
  (Mr Coates) No, for ever. TUPE is without limits. And we insist in the contract that the contractors recognise TUPE and honour all terms and conditions that are transferred, that the employer had, and are transferred across to the new employer. TUPE does not cover pensions, however, and there we have separate provisions that insist that the provider gives a broadly comparable pension scheme to the NHS pension scheme, again, for all employees who transfer across, and again for the entire life of the contract.


  189. Are there any points any of you wish to add? You have agreed to follow up on a couple of points.
  (Mr Reeves) No; thank you.

  Chairman: Can I thank you all, gentlemen, for a very interesting session. We are most grateful for your co-operation. Thank you very much.

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