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Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 480 - 499)



  480. Basically, you are agreeing with the Treasury that it would not make much difference at 6 per cent?
  (Professor Pollock) I am saying it is important to look at that 6 per cent.

  481. But it is not the crucial factor?
  (Professor Pollock) I think the VFM is a political exercise. It is politically loaded. If they do not do make PFI the best option on the discount rate, they will do it on the risk transfer, and it does not tell us the real question, which is what is the true cost and what does it mean in terms of affordability?

  482. This brings us to what is an important question for the Committee, if what you are saying about PFI being an expensive form of capital is true, why do you think the Government is promoting it? I know it is a political question..
  (Professor Pollock) The macroeconomic case has been discounted, they are only left with value-for-money and today value-for-money is a black art, not a science. We are left with the fact that this is an international agenda. We are left with some of the questions that were asked at the beginning of the session, which is what is in it for government and for business. This is a huge new industry for accountants, lawyers, management consultants and for construction industry.

  483. Basically what you are saying is the government fill their pockets with big business.
  (Professor Pollock) There is a new pact with big business which is not operating currently in favour of the population.

  484. What you are saying is the Treasury is quite happy to collude in the waste of public money?
  (Professor Pollock) It has not opened the VFM up to proper scrutiny and analysis and there are no proper data. You can only say there is a much larger agenda, which is the export of business and trade in services. For example the US health care industry and the US government deem, the export of managed healthcare for them, is foreign policy. That is what they have written.

Julia Drown

  485. Is the National Audit Office also involved in this collusion with the government—
  (Professor Pollock) I could not say.

  486.—to get some value for the money
  (Professor Pollock) I could not possibly comment. It is up to Parliamentary committees to ask the NAO to do the job of parliamentary scrutiny, as I understand it.

Dr Naysmith

  487. What questions do you think we should be asking the Treasury and the Secretary of State for Health when we have him before us in two or three weeks time?
  (Professor Pollock) I think given you really need a true understanding of the impact of rationale business and capital charging and the switch from public to debt financing. What is the real rationale behind the charging for the capital? Why does the VFM appear to be a political exercise. Questions about the discount rate and finally the risk transfer. What arrangements are going to be made for an ex poste analysis of these schemes. Finally, why is the data so very, very poor, and inaccessible both from the Treasury and from the Department of Health on these issues.

  488. With respect, some of the data that is published questioning PFI is pretty poor as well. I am not necessarily suggesting all of yours is. Some is very anecdotal and when you go and speak to people about it you get a different view.
  (Professor Pollock) I would be interested to know with what parts of the analysis you would not agree with?

Dr Taylor

  489. I am trying to keep things absolutely simple, can I go back to the point of the money leaking out. Capital charge is roughly eight per cent of a trusts income which remains within the NHS, so it is still available for patient care, whereas the money paid to the PFI goes out of the NHS. Is that right?
  (Professor Pollock) Capital charges, I believe, are now voted as appropriation in aid. This has changed where finally they were non cash. Of course as soon as you contract out with the private sector for any services that were formally provided by the NHS that will include a component of capital which you will pay for out of your revenue budget, so at that point money leaks out.

  490. Thank you. I just want to go on to the revenue cuts as we have heard it said, really to the trusts, because this money is ring-fenced, it is a first call on your budgets. I can only speak for the Worcester one, it appears that the first call on their budget is something like 16 per cent of their income to go out before anything else is considered. Is this a strain? Have you taken this into account? How does it affect you?


  491. Can I bring Miss Jackson in.
  (Ms Jackson) We certainly know how much we will be spending every year on the private finance scheme.

Dr Taylor

  492. What proportion of your total income is it? Is it something that leaves you scope and flexibility with the rest of your income?
  (Ms Jackson) I have a slight problem in answering that questioning in that it is "commercial in confidence" and because we do not have the bids in yet. We could answer that question on paper. I think it certainly enables us to plan for the future, knowing how much income is going out to the private sector, because we know the standard of services which are to be provided and that the buildings are to be maintained to ensure that the patient environment is appropriate.

  493. It is commercially confidential at the moment
  (Ms Jackson) Yes. I think we can give you a written answer.
  (Ms Herbert) Yes. Our percentage is between 10 per cent and 15 per cent. I do not have a particular concern in the current climate that we cannot cover that, but if we took ourselves back to the years when the NHS was having to save three per cent year-on-year it would be more difficult to save from the entire budget.

  494. This is not leading to actual cuts in bed availability and in the availability of services in your neck of the woods?
  (Ms Jackson) We are increasing the number of beds.

  495. Increasing the number of beds.
  (Ms Herbert) Could I say, I think we might have an interesting case study here in PFIs before the government put additional money into the NHS and afterwards. Certainly if I can take you back to the time when our PFI was signed up, it was a period of driving beds out of the NHS, increasing the efficiency of the bed usage and we certainly saw a large number of beds come out of the system in South Manchester. That was not directly as a result of the PFI, it was as a result of reconfiguration. Some of those beds were reprovided, some of them were as a result of greater efficiency, being on one site rather than two. We certainly did lose beds as a result of our configuration.

  Dr Taylor: I think that is a very important point.

  Chairman: It is very interesting.

  Dr Taylor: Many of the PFIs are now recognising because of the National Beds Inquiry that they do need more beds.

Julia Drown

  496. Can we get that clarified from the Trust? In your experience has PFI in any way led to the reduction in the number of beds?
  (Ms Herbert) Not directly.

  497. Indirectly?
  (Ms Herbert) It has certainly been an additional pressure in the system.

  498. Can you explain why?
  (Ms Herbert) In a sense that we have had to make the scheme affordable and in a sense that there is a front loading of the payment profile of the scheme. There has been more pressure on the cash flow of the system as a result of the PFI rather than a Treasury funded option.

  499. Did you not get smoothing monies?
  (Ms Herbert) Yes.

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