Examination of Witnesses (Questions 540
THURSDAY 15 NOVEMBER 2001
(Mr Davis) There are 22 beds now allocated to rheumatology
and 84 beds staffed up for elderly care. This is probably back
to the acute hospital being an inappropriate setting for their
care, it is a bed blocking issue. The scheme now has 560 beds
and also a spare ward that could be brought back into use if necessary,
so that brings it to about 600 beds.
541. How are the extra 120 beds being funded?
(Mr Davis) Within the PFI context what we are providing
is all the support services and maintenance to that retained estate.
There is no capital charge coming through the PFI payment stream,
we are providing routine services.
542. We are getting 120 extra beds for nothing.
(Mr Davis) The trust will retain the capital charges
543. Those remain in the public sector attracting
(Mr Davis) Yes.
Dr Taylor: I am mystified.
544. One thing which has interested me throughout
this Inquiry is where the private sector has been seen to add
value and why the public sector could not have done that or whether
you feel the public sector can do it and the private sector cannot?
I am particularly interested in South Manchester, where you have
had some good and some poor experiences, some places have good
capital investment coming from the NHS, others are poor. In terms
of reference could you suggest recommendations to the Committee
and would you be able to give us guidance about particular areas
in the private sector which might be able to help and why? In
responding to that I wonder if KPMG could respond to this idea
that if something really dramatic goes wrong in terms of risk
transfer the private partner can walk away? I did want to ask
some questions on refinancing but if we can do that to KPMG in
writing that would be helpful.
(Ms Herbert) In terms of where value has been added
I think one of strengths of a PFI deal is that the building of
the hospital is not just overseen by the NHS it is overseen by
the partners to the PFI who are going to be involved for 35 years
in maintaining it and cleaning it. Therefore I think there is
a drive there to get a higher quality product because you have
three other bodies scrutinising it, all of whom have an interest
over the next 35 years. The specific issues where we have successes
and weaknesses in the services, I suspect, are particular to our
trust because another PFI which has the same set of partners has
had a reciprocal set of experiences.
(Ms Jackson) I would agree on the high quality of
building we can expect. I do not have anything else to add.
(Mr Gritten) From my perspective I have set out to
give a positive representation of the benefits of the public sector
scheme and we have a private finance initiative in renal services
where we invited the private sector to convert an area of our
building, which is extremely effective and we have kept the staff
on our books. I am in the process of negotiating with KPMG staff
for a significant PFI in the IM&T sector, where I think the
risk transfer of making sure you deliver availability, disaster,
recovery and a responsive IT service are precisely the sort of
areas we want to look at.
(Mr Stone) In terms of improvement there are dramatic
areas, I agree with that. The integration of the information from
GP through to the entire network is potentially immensely valuable
in terms of saving lives. Going back to the point, if it is an
absolute catastrophe then ultimately the private sector does not
walkway, they crawl away in a pretty dreadful state, a) having
lost shed loads of money and, b) having ruined their reputation
with their funders and their future customers. One of the big
differences that we have noticed with the way the PFI process
has developed over the years is that there is so much more fundamental
transparency and an ability to stop inappropriate deals being
put together in the first place. There is a lot of care and attention
paid to the structure of the bids, even to the point where we
have on occasions taken a deal after the preferred bidder stage,
after all of the competition has taken place and all the vigour
has been applied to it, we have been brought in, and in one particular
case we were able to help the bidder restructure his deal to reduce
the annual charge from £9.2 to £8.3 million a year,
which is about £27 million over the life of the deal. In
doing that it was about making sure that the business was properly
sound, robust thought through as carefully as we could and able
to withstand all of the slings and arrows all of the way through.
Ultimately the public sector will always retain delivery risk,
whether it is the tube or hospitals or roads. What is important,
and what has changed, is there is much greater care given to planning
for the long term.
(Professor Pollock) I am just quite amused about the
claims of improved design. Sir Stewart Lipton, the government's
architectural Tsar until he was sacked in favour of Prince Charles,
said, "The design of first 15 PFI hospitals is poor, not
uplifting and will not do anything for society and some designs
could be putting patients lives at risk". That aside, I think
there are some real issues about the planning process. Our evidence
has shown there is a major problem in terms of capacity that may
or may not be rectified, but there is no population needs assessment
going on. Secondly, minor things like offices are not provided
in many of the new PFIs. Thirdly, the reprovision of diagnostic
facilities. In some parts of the country doctors are considering
raising their own equity to reprovide their diagnostic facilities
which have not been adequately reprovided in new hospitals. I
think there are major issues about the planning of these facilities
and the extent to which they will meet the population's needs.
Finally, a note of caution which is on regulatory capture, a very
common phenomenon in the US where you are supposed to have post-contract
monitoring and compliance, where regulatory capture and corruption
occurs, the risks eventually revert not just to the government
but to the tax paying public and patients. Note that in La Trobe
a Regional hospital in Australia, the Government of Victoria had
to buy back the La Trobe Hospital because of the losses incurred
on the contract and it could no longer guarantee the standard
of care. In Modbury Hospital the South Australian Government has
had to come to the rescue of the contractor and increase the contractual
payments because otherwise the contractor would have defaulted.
These are massive risks which were not transferred.
Chairman: We may need to go to Australia to
look at this.
545. This is really to Central Manchester, because
I think this must be relevant to your experience, do you think
greater transparency in the PFI process, including the publication
of all documents would help or hinder the process? Secondly, is
there a tension between commercial confidentiality and what is
in the public interest?
(Ms Jackson) For the first point, all documents to
all intents and purposes were in the public domain until the end
of April this year, when the Treasury issued new guidance on not
disclosing the public sector comparator or the affordability envelope.
The Full Invitation to Negotiate issued on 30th April, a few days
after that guidance, does include our PSC at that time but it
has changed since because we have add the extra capacity.
(Mr Deegan) In terms of transparency we set up an
over arching strategic board, in hindsight we could have had membership
of local Community Health Councils in June of this year rather
than September or October when it was agreed.
546. You know what I am referring to, they feel
they have been particularly frozen out of the process from the
beginning. It is not just about the money but it is also what
is actually being planned and where the scheme, if it is changing,
where it is at. I hope I am not overstating that they feel that
there evidence is strong on these points.
(Mr Deegan) Up until April all of the information
was in the public domain. The three CHCs in Manchester are regular
attenders at our trust board and all of the issues of PFI are
discussed in Part one unless they are commercial in confidence.
547. That is purely on the private sector part,
you would have no problem in having it all in the open?
(Ms Jackson) Our public sector comparator and our
accordability envelope are commercial in confidence and until
we sign the contract that will remain so.
(Mr Davis) We have no problem with those figures being
publicised, it is only when we are in competition
548. This evidence from the CSC is very interesting
coming, as it does, before the restructuring. CSC members have
concerns that significant changes affecting local health authorities
have been made but not reported and by them not being discussed
the public have potentially looked to the NHS for unaffordable
schemes. It is quite strong stuff.
(Mr Deegan) It is fairly strong stuff. We have tried
to draw all this out in our memorandum. And certainly the understanding
of the health authority, who ultimately will be providing the
funding for this with the PCTs. We went through it at great lengths
at the trust to involve a range of stakeholders, city council,
CHCs through a project directors forum and when this ceased, we
came to an agreement that we needed to move to bilateral discussions
with individual organisations. We then moved to a position where
the Community Health Council is on the Strategic Board and all
of the key issues will continue to be discussed in Part one of
our Trust Board.
549. Once the contract is signed are you saying
that they will be much more closely involved than hitherto they
(Ms Jackson) Mike is saying they are going to be involved
in the Strategic Board discussions.
550. That will give them the access that public
interest should require?
(Ms Jackson) Subject to them retaining confidentiality.
551. I know Mr Deegan and Miss Jackson wanted
to respond to Professor Pollock's comments, and I would like you
to do that, I wonder whether everyone would agree it should be
possible for the public who do not understand the 300 page business
case to put on one side of A4 why one scheme might look better
(Mr Deegan) The first point, some comments on Professor
Pollock's contribution, teaching facilities and diagnostic facilities
are part of the development. In terms of how we communicate the
schemes, it is not just to members of the local community it is
to our own staff and we will leave with the Committee a recent
booklet we have circulated.
(Ms Jackson) There are two other things we have done,
planning on the basis of the needs of the population and in addition,
closely followed, we very heavily stressed that we are looking
for design quality. That will be a large part of our evaluation
when bids are submitted in a fortnight.
Chairman: Can I on behalf of the Committee thank
you all for a very interesting session, we are most grateful.
We may well follow through with some written questions and we
would appreciate your cooperation in responding to these. Thank
you very much.