Examination of Witnesses (Questions 152
MONDAY 29 OCTOBER 2001
152. Can we start the second part of our session.
Can I thank our witnesses. I am sorry that the GMB were invited
but have not been prepared to come today, they must have their
reasons for not being here. Can I briefly ask our witnesses to
(Mrs Lemmon) My name is Jan Lemmon, I am an RCN steward
in the Trust. I work as a staff nurse on the surgical unit.
(Mrs Bottrill) My name is Pat Bottrill,
I am Chair of RCN Council and a council member for the northern
region for the Royal College of Nursing and I have previously
worked in the Newcastle Hospitals NHS Trust.
(Mr Weeks) My name is Stephen Weeks,
I am a national officer with UNISON. I have overall responsibility
for UNISON's work on PFI. As part of the UNISON team we invited
David Price from University College London on Public Policy as
to act as an adviser on one of question areas you may be asking
(Mr Moss) I am Robin Moss, I am UNISON's head of health
for the Northern region and I am also the full-time officer that
looked after this Trust for the past six or seven years during
153. Can I express our thanks to you for your
written evidence. Perhaps I can begin by asking a general question
which I put to the previous group of witnesses, that is that impact
of the PFI route on the wider health economy. I do not know whether
you were in when I asked the first question to our colleagues
from the Health Authority, it has been put to me that within primary
care within the health authoritys there are concerns that the
resources in primary care have been affected by the PFI route
chosen for the two major schemes in the Health Authority area.
Is that an issue that has been picked up by your two organisations?
(Mr Weeks) If I can begin with that, it is an issue
that UNISON has been concerned about for some time. It is an issue
not just in this Trust but in a number of Trusts, most recently
in Central Manchester. The important point is we have concerns
about it but we are not particularly singling out this Trust.
We do have what we believe is documented evidence of the impact
of the costs of a PFI scheme on the overall health economy in
the area, and Robin might want to add to that.
(Mr Moss) This is from the horse's mouth, Ken Jarrold,
who is the Chief Executive Officer of the County Durham and Darlington
Health Authority went public in so far as the letter was published
in the local press two years ago drawing attention to the impact
of having two major PFI schemes within the County Durham area
and was making a plea for additional funding because of the impact
of the two schemes within the local health economy. That is not
just us drawing attention to that fact, I can make a copy of that
letter available if necessary.
154. That would be helpful. That is a slightly
different response from the one we got from Mr Flook. This is
two years ago and it may be the situation is different now. You
would substantiate that concern from the information that you
(Mr Moss) The letter is dated 2nd December 1998 and
page 3 of it says, "nevertheless the financing arrangements
for PFI schemes will create long-term pressure on available revenues
resources and this will disadvantage the authority relative to
other authorities in the development of patient services".
It ends by saying, "we ask that regional office, amongst
a number of things, to support the case that the revenue pressures
created by our reliance on two major PFI schemes should be recognised
by additional waiting within the revenue resource allocation form".
I have other quotes, even more recent, health authority documentation
that talks about the pressures that the PFI schemes are creating
on the local health economy.
Chairman: You are willing to copy those for
155. In your opinion, the Union's opinion, could
the Trust have obtained funding for this hospital without using
(Mr Weeks) That, as they say, is the £250 million
question. Without being privy to the decisions that the regional
office takes about allocation of resources for capital expenditure
as opposed to revenue expenditure it is not possible to answer
that question in that way. Clearly we heard in previous contributions
from the Health Authority their expectation was that they would
not have had the available public capital for this scheme. I think
we would answer the question in the other way, in the sense of,
if what the government says that public sector comparators are
only proceeding with schemes on the basis of value-for-money is
correct, and we take them at face value on that, then money should
have been available for this scheme had a publicly funded alternative
been shown to be the most effective. We obviously appreciate from
the perspective of individual Trust managers things may be seen
in one way and PFI may be seen as the only game in town. If the
government is proceeding on a value-for-money basis then public
money should be available. In terms of the wider question of whether
the government as a whole can afford public capital development,
obviously that is a wider debate, but the most recent authoritative
review of that by the Institute of Public Policy Research in their
Public/Private Partnership Commission in relation to the first
wave the government could have afforded those schemes without
breaching its overall economic policy. We can obviously have a
wider discussion about government economic policy outside this
(Mr Moss) By way of an addendum to that, virtually
every major capital scheme within the region in the last five
or six years has been PFI funded with the exception of one. There
was A major scheme in Sunderland which did get public funding.
This whole question was a major question of resentment for the
Trust management at the time, the outline business case for building
a 565 bed hospital was approved in January 1994, the full business
case would have been approved at the end of that year with public
money and a start building the scheme would have been made with
public money but then in October 1994 PFI became the only game
in town. Had it been a matter of a few more months this scheme
would have been built with public money. Both of the chief executives
involved and a large number of other people I have spoken to within
the Trust would have preferred that to have been the option.
156. You mentioned the figure of 565 beds in
the outlined business plan, the Trust mentioned a figure of 507.
(Mr Moss) We are relying on the analysis that we had
done of the business plans by the UCL unit that David Price belongs
and when the business plans were eventually made available to
us and the original outlined business case had a figure of 565
in, as I understand it.
(Mr Weeks) It is on that 565 figure, that is the figure
the Department of Health centrally had shared with UNISON in terms
of overall lists of figures. As with any definition of bed numbers
there may be some debate round the edges of that. I do not think
anybody is disputing the overall trend. We can share that with
(Mr Moss) The key point is, had it been built with
public money at that time it would have had more beds and it could
have been built with public money had it not have been for the
imposition of the PFI scheme.
157. That is not at all what the previous people
told us. They said quiet clearly that the number of beds were
worked out before the idea of PFI came in and the same number
would have been produced with public money as with private money.
You obviously do not agree with that.
(Mr Moss) That is a very interesting way, if not a
specious way of putting things. Let us get the historical context
correct, there was an option appraisal done in the earlier 1990s
and that option appraisal had 798 beds in it. By the time 1993-94
came about, when the outline business case was produced, it had
565 beds in. I listened with interest and I have heard this statement
from Mr Mason on a number of occasions that it would not have
made any difference whether it was a publicly funded option or
a privately funded option. I think that is specious, in the sense
that we all know that once PFI intervenes there has to be a level
playing field, you cannot have one scheme building 565 beds and
another scheme building 450. In order to get a like for like comparison
for value for money purposes they have to be on the same level
playing field. That is the sense, I think, which Mr Mason means
that the public sector scheme would have produced 454 beds whereas,
in fact, had public sector money been injected and used in 1994
it would have been built, I think, with 565 beds because that
was the outline business case.
158. So I understand completely what you are
saying, what you are saying is that the number of beds in this
hospital reduced directly as a result of PFI and had nothing to
do with Department of Health guidance about number of beds that
(Mr Moss) We think that is partially the case.
159. What do you mean by partially?
(Mr Moss) Certainly the original scheme going back
to 1992 for a district general had 798 beds in. In between then
and 1993-94 the whole process of capital charging was imposed
on the Trust so that Trusts which had previously got their capital
free suddenly had to start paying six per cent every year for
their capital costs. In deciding bed numbers, therefore, what
you have is the coming together, this is the evidence in our