Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 420 - 439)



Dr Taylor

  420. A slight change in tack: I am sure we are all very pleased to see Mr Gritten here from Berkshire and Battle, because they appear to have been the only people who have bucked the trend. We have been told so often that PFI is the only game in town but you have bucked the trend. Is this because, looking at your paper, paragraph 3.3, PFI providers were only interested in building a whole new hospital, were not interested in taking on parts of it? What were the other reasons why you were able to get a public sector project going?
  (Mr Gritten) May I first of all make a few points in context before I answer that question? Under the original option appraisal, there were greenfield site options looked at but the cost of a greenfield site option compared to consolidating the services on to the Royal Berkshire site were something like twice the cost. Secondly, the amount of refurbishment that is involved in the project is 42 per cent of the project. The third point is that the Royal Berkshire site is actually a very constrained site to work on and, with operational services being provided from it, it is a very complex build. That said, it was back in 1994 that the first look at PFI took place and it was very early days in terms of the PFI process. The first process which took place was to see whether or not a financing deal could be found, that could not be done. There was one expression of interest but there was no management content to the proposal, so the whole scheme was turned down as not meeting PFI requirements. There was a second attempt to find facilitative management firms who would take it on, but they were not prepared to take on the project or elements of the project because of the risk associated with working on a site which was still operational with the amount of refurbishment needed. The third attempt was to see whether any element of the total scheme could be "PFI-ed". They looked at, for example, carparking, office blocks, a private hospital being provided on one of the carparks, bringing in the retail sector, and on all counts they were unable to demonstrate that they could reduce the affordability and able to provide better value for money. Essentially, they were not able to demonstrate they would be able to have the income stream necessary to reduce the cost of financing the deal.

  Dr Taylor: So it was not really a true comparison in the sense we were looking for.

Julia Drown

  421. In Durham they were redeveloping on the same site, what was different about your scheme?
  (Mr Gritten) It is across the middle of the site rather than at one end. So, for example, two years ago we had to run the A&E department from Outpatients for three weeks whilst we moved departments around, and obviously there are considerable risks associated with doing that for the private sector. I would strongly refute the comments made earlier that the public sector cannot produce buildings which are designed for the future which are thoroughly flexible. In fact, what anecdotal evidence I have about PFI is that our design was considerably more advanced than anything coming out of PFI, because we were able from the start to use users, that is the staff and patients, in the design we were providing.

Dr Taylor

  422. We actually learnt in Carlisle that they had got a fully worked up plan for total refurbishment under the public sector at a cost of £35 million, and the day before tender they were told the rules had changed and they had to go for PFI. That was Carlisle.
  (Mr Gritten) Just to reinforce the point I made earlier, this is a self-financing deal. At the end of the day, we will not be financing the amount of capital which has been borrowed by the private sector to continue to run the project. We will have made savings, increased bed numbers substantially by the end of this project. It is not entirely comparable in that it is not a totally greenfield site build but it is a business case which was agreed by the health community to make sure that we stayed within the affordability limits, we got the best we could for the capital being deployed, and we were always mindful of the fact there were other schemes which would need capital for mental health, for community care, in the coming years.

  423. You have actually picked up my next point because I was very struck by your figures on page 5 of your paper. The initial scheme was £59 million, inflation functional content putting it up to 105. If you compare that with the Carlisle figures, construction is 67 million, financing is 16 million. If you compare that with Worcester, construction £82 million, financing £29.8 million. Have you not made an immediate difference, and demonstrated the difference between the public sector and the private sector? You do not have to spend money raising the finance.
  (Mr Gritten) Absolutely. Furthermore, and it is possibly peculiar to our particular build, in the original business case the Battle site was valued at £15½ million, we will be aiming to sell on a valuation of last month at probably £35 million, so the total cost of the scheme will be 35 off the 105 we are proposing here.

Julia Drown

  424. Would you not need to include a depreciation equivalent in the financing costs?
  (Mr Gritten) Yes, it is not absolutely comparable.

  425. You are not comparing like with like there.
  (Mr Gritten) No, but what I am saying is that for a substantial element of rebuild on the site, even if you added in another 40 or 50 million to complete the site, in order to give an equivalent new build, you still have hugely "better value"—to use those words loosely—than you might have got out of a private sector deal.

  Dr Taylor: Thank you, that has answered my question.

Mr Burns

  426. I wanted to ask Mr Davis, is your evidence that soft contracts are being placed by consortia with their own in-house builders or subsidiary companies?
  (Mr Davis) There are certainly firms in the PFI market who have in-house soft service providers within their grouping. I could name two or three.

  427. I would also like to hear Mr Stone's opinion.
  (Mr Stone) I agree there are a number of contractors who do have captive firms of their own. There are probably some cases where the FM element is properly and vigorously competed, so it is a mixture.

  428. Do you think it is satisfactory to have a mixture?
  (Mr Stone) If we had a mature industry then the process would be different. What we have seen is the development of the industry over the last five years where we have seen increasing competition. We have seen a growth in the market, and in terms of getting best value in the long run we need forms of testability and full transparency.

Mr Amess

  429. Questions to Mr Stone and Mr Davis: I understand the Secretary of State, lucky fellow, was in Spain last week looking at a privately managed but publicly owned hospital. Do you think that is something worth looking at?
  (Mr Davis) It must be worth looking at because it gives choice to the Secretary of State to use public money in the best way. We are not mature enough, to use Tim Stone's words, to say we are ready to be managing large NHS hospitals, but a point I would like to make is that our consortium is not in the business of providing health care. We supply assets, technology and support services to the NHS, we are not a substitute for it, and that is a very important distinction I would like to make.
  (Mr Stone) I welcome the exploration of these techniques, in just the same way as I welcome the visit of my own team to the Ministry of Health in Barcelona yesterday and today, where they are looking at lessons from us. The more we can have openness, visibility of honest data, the better for our taxpayers, so, yes, I welcome it. Whether it works here or not will be partly analytical and partly political, with a small or large P.

  430. I shall not ask Professor Pollock but I think I can see where she would be coming from on this particular issue. Our Chairman touched earlier on clinical services, can we hear from both of you if you think these should be included in PFI?
  (Mr Davis) As an individual, I have to say I have extreme caution about it, but that is as an individual. It comes back to my philosophy that we should be supporting the NHS and not substituting for it in its clinical activity. Where I would like to pick up the debate is something which came up in last week's inquiry which is about the role of the ward sister and the NHS team at ward level. Where I would draw the line is that I think it is entirely proper for the private sector partner to be supplying the assets, the technology and the support services to include ward level services up to the registered grade, so not including registered staff but up to non-registered staff.


  431. What do you mean by that?
  (Mr Davis) I think it is an entirely proper thing to have the health care support worker, the health care assistants, however it is described locally, included in the private sector provider's remit.

  432. So you are quite happy to have the cleaner giving out the tea to the wrong patients, which is what we have discovered is happening?
  (Mr Davis) That could happen whether it is in-house or out-sourced, it makes no difference, it is all about training.

  433. It is also about management.
  (Mr Davis) It is about management and training, which was the issue discussed last week, and we think that the ward sister can have responsibility for the overall management of the ward whilst still having private sector staff providing health care support to specialist nurses.

  434. What you are saying is very different from what we were being told by the ward sisters in the hospitals we have been to, because they did not see it that way.
  (Mr Davis) I do not disagree with my colleague here from Battle Hospital but I think both the private sector schemes, particularly the recent ones which are in bid now, are showing huge advances in design. What we have not yet devised, and the time is right, is how to advance the ancillary services in a much more positive way, and that has to be around dealing with the terms and conditions of employment so there is parity. What struck me again was how much we had in common with Unison last week in their evidence, because they were concerned with a two tier work force, but it exists in the NHS now, it is called local trust terms, and in almost every case local trust terms are well below Whitley—and I can give you examples if you wish—yet they get perpetuated in the public sector comparator so the trust cannot afford to improve the lot of the ancillary staff on local terms, and then we inherit that under TUPE, so it is then locked into the contract.

Mr Amess

  435. Mr Stone, in brief, easy to understand language, could we have your view?
  (Mr Stone) I share Mike's concern about the extent of the boundary and whether I would want to see a fully clinical service—having lived in the United States for a few years—and I am concerned about our ability to manage it. What I would love to see is a proper and honest examination of some core services at the very least, and decisions about where the boundary is placed based on the ability to deliver services consistent in the long-run, and for those to be evidence-based.

  436. Finally, any ideas about how clinical negligence could be shown in costs? There is an obvious liability there.
  (Mr Davis) I do not think I am qualified to answer that.


  437. This is more Mr Stone's baby because he is the one suggesting clinical services may become privately owned.
  (Mr Stone) With respect, Mr Chairman, I am not wishing clinical services—

  438. I am reading your evidence and that is the impression I get.
  (Mr Stone) Heading towards clinical services.

Dr Naysmith

  439. You might get there!
  (Mr Stone) If we do, I will take it on board.

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