Examination of Witnesses (Questions 1
- 19)
MONDAY 15 APRIL 2002
MR NIGEL
CRISP AND
MR PETER
WEARMOUTH
Chairman
1. Good afternoon and welcome to the Committee
of Public Accounts. We are very honoured today to be joined by
Mr Jozef Stayl, who is the President of the Supreme Audit Office
of the Slovac Republic. We welcome Mr Crisp, who is going to be
talking to us about the management of surplus property by trusts
in the NHS in England. Before we start, Mr Crisp, can I raise
one point with you. Following our hearings on 19 November and
14 January you promised us notes and we are still waiting for
these notes. This makes it very difficult for us to produce our
reports. Do you think we could have them?
(Mr Crisp) My apologies, Chairman. In
fact, you have got all the notes apart from one particular question
delivered today. I appreciate that is late, so my apologies.
2. Thank you very much. Would you like to introduce
your colleague.
(Mr Crisp) Could I introduce Mr Peter Wearmouth, who
is the Chief Executive of NHS Estates.
3. Would you like to start by turning to Page
13 of the Comptroller and Auditor General's Report and looking
at Paragraph 2.5, where you see that 18 per cent of the trusts
had no estates strategy, that is about a fifth. If you go over
the page to Paragraph 2.9 you will see that a fifth have still
to meet the NHS Estates' exemplar standards. How are you going
to ensure that strategic planning improves and when?
(Mr Crisp) There are three or four points I would
make. The first point is that the very big issue here is are we
achieving value for money through the disposals of the estate,
and this Report shows that indeed the NHS is doing that, which
I think is extremely encouraging. However, we need clearly to
improve some of the processes. The actual facts are that as of
April 2000 every trust was meant to have an estates strategy and
from that date as well we introduced arrangements for exemplar
strategies. At April last year 82 per had achieved it, which is
the figure to which you are referring. That would have been higher
if we had not been involved in some reorganisation at the time,
so there are a number of these trusts which are just going out
of existence or indeed a number just coming into existence. The
same is true at this year end so the figure is of the same order
right now. However, I believe we are now entering a period of
organisational stability and so our intention is to see 100 per
cent by December of this year. In terms of sanctions there are
two. The first is how do we help people to achieve it, and that
is very much the job of Peter and his colleagues in NHS Estates,
where their role is to help and support people in developing the
estates strategies. In terms of what we are doing where that is
not happening, we have two strategies. One is the traditional
management performance process of holding people to account and
reminding them of their targets and helping them to achieve their
targets where they can, but probably the more powerful role in
this particular instance is that people do not get investment
plans unless they have an estates strategy. It is a very simple
mechanism.
4. Perhaps I could ask Mr Wearmouth to turn
to Paragraph 2.14 where we read the NAO "found that only
66 per cent of NHS trusts in our survey complied fully with the
guidance." It seems extraordinary that a third of trusts
are not following your guidance to review their estate annually.
We are talking about a very important subject here. We are talking
about possibly one of the largest, if not the largest, estates
in the world. I find it rather strange and I am sure my colleagues
find it rather strange that such a large number of trusts apparently
have no strategy to review their estate. You would have thought
that would be the first thing they would do.
(Mr Wearmouth) If I can outline when the guidance
was actually issued to carry out an annual review of the trust
estates and, secondly, look at the timescales and dates that the
NAO review took place and then look at the board level report
and how we can performance manage NHS trusts in the delivery of
estates strategies. Guidance was issued in mid to late 1999 to
come into effect in April 2000. This coincided with the NAO survey
that was being undertaken. An estates strategy is essentially
a five-year forward look into how the trust itself can deliver
its assets to provide health care and, as such, 97 per cent of
trusts did say in the NAO Report that they had reviewed their
estate. We do request in the guidance that was issued in late
1999 that a control assurance statement is signed by the trust
accounting officer who acts on behalf of the board to make sure
they have done their reasonable best to deliver an estate that
is fit for purpose. We will ensure that that is taken forward
by performance management and by reviewing with strategic health
authorities the performance of NHS trusts in delivering estates
strategies. I think we have tried to put in place a strategy that
will deliver an annual review by NHS trusts of their asset base.
97 per cent of trusts did state within the Report that they had
carried out a review.
5. If you were going to come back here in two
or three years' time, you would be able to convince us that you
had a successful strategy to ensure that all these trusts have
identified property that is no longer required and that they are
freeing it up for the wider benefit of the NHS?
(Mr Wearmouth) 97 per cent of trusts have undertaken
it now. The question is should they undertake it on an annual
basis.
6. Exactly. And you will ensure that?
(Mr Wearmouth) Yes.
7. Thank you very much. I wanted to refer you
next to Section C, Pages 18 to 21, that is liaison with local
authorities. I was going to ask a general question about that
but since then the question of Napsbury Hospital has come up which
is just an example. Mr Peter Lilley has raised this with me. This
was a sorry saga where because of lack of liaison with the local
authority literally hundreds of thousands of pounds were wasted.
I accept that it was not necessarily the fault of the NHS; it
was perhaps more the fault of the local authority changing its
mind, but what lessons have you learned from Napsbury to try and
ensure that this does not happen again?
(Mr Crisp) Let me make two points and ask Mr Wearmouth
if he might add into that. One of the big things about Napsbury
was that it was big and complicated. It was very important that
we as the NHS did take it to planning appeal. As you know, at
the beginning of the process the land was valued at £10 million
and having got the planning approvals it was valued at £66
million. There was at a simple level view a very important lesson
to the NHS about being really professional and proficient in our
evaluation and assessment. That was a good example of that. The
bit that is depressing about this is that it took a long time
to go to a planning appeal at some considerable cost, although
we won the planning appeal. Whether getting a better relationship
with the local authority and better liaison with the local authority
at an earlier date would have made any difference or not, I think
it is quite difficult to tell within that. Again, it makes the
simple point that the more we in public service are working together
on issues and looking together at the issues, the more fruitful
it is. Those are the two general points. We must be extremely
professional, as we were, and, secondly, we must work better with
the local authority. On the specifics Mr Wearmouth may be more
familiar with the example.
8. It is always better to proceed by way of
practical examples. If there had been better liaison with the
local authority, how much money could you have saved on planning
issues? The figure I have been given is that up to £800,000
was wasted in this process in one hospital.
(Mr Crisp) The figure I am going to give you is the
same one. £1.1 million was the cost of the planning appeal
and we got £340,000 back. So you are right.
9. Can you give us reassurances about the future
in terms of better liaison with the local planning authorities?
(Mr Crisp) You cannot legislate for every case. There
are personalities and individuals and individual circumstances
and so on. This Report from the National Audit Office reinforces
the importance of NHS/local authority relationships. It does say
that most trusts—and again I will try and bring Peter in
here—have a good relationship and they do work together.
Some of the recommendations are saying, effectively, that 100
per cent of NHS trusts and 100 per cent of local authorities need
to be in close liaison all the time, which is probably unrealistic
given the fact that many trusts and NHS organisations, PCTs, will
not have large estates disposals or planning issues all the time,
but when they do—and Napsbury is a classic example—you
need to have prepared the ground for some time. We do give people
very clear guidance around that. Can I leave the slightly more
general point to Mr Wearmouth.
(Mr Wearmouth) I think it would be true to say on
Napsbury that it cost the NHS £800,000 but the site was valued
at some £66 million as opposed to the £10 million it
was valued at if we had not gone to appeal. That might not be
the right answer in terms of joined-up government but it does
show that the NHS was right in trying to achieve value for money
by going to appeal in that particular situation. If I can look
at how we work with local planning authorities, this particular
Report is focused on estates and town and country planning matters.
It would be true to say that we do need a close relationship between
our local authority colleagues and delivering the health and social
care agenda. Although the NAO Report did state that around three-quarters
of trusts reported moderate to good contact with local town and
country planning officers within local authorities, there is a
need to bolster that and ensure that we do have a better working
relationship. It is not just at local area, it is at regional
area and on the national scene. When property has become surplus
for the NHS and the NHS wishes to dispose of it, it follows a
different procedure than it would normally follow in delivering
health care services. There is a Green Paper on planning that
is in preparation at the present time. It states clearly there
is a need to update the town and country planning process. It
does point out that local authority town and country planning
officers feel they are over-stretched and in some instances we
have undertaken work in development briefs to assist them in bringing
forward land sales for disposal. We are taking on board the points
that were raised in the Report about good practice and putting
this on a website and we have prepared some guidance for local
authority officers and NHS trusts about the relationship between
NHS modernisation and local authority development plans.
10. Thank you, Mr Wearmouth, for that very full
answer. When my colleagues are asking questions, just try and
keep the answers a bit briefer if you can. It does not matter
so much for me but they are time-limited. Thank you for your consideration.
Can I ask Mr Crisp about these out-of-date valuations. This is
mentioned particularly on Page 24 at Paragraph 3.8. Obviously
this is going to affect what the NHS gets on sales and it is quite
an important point. If you look at Paragraph 3.7 on Page 23, on
average, sale prices exceeded valuation by 32 per cent. What do
you plan to do to make sure that valuations reflect the true worth
of surplus NHS property?
(Mr Wearmouth) We do require valuations of all property
disposals before marketing commences but, as the Report states,
there can be instances where these valuations become out of date.
What we agreed to do is to accept the Report and we are looking
at (prior to marketing) having high and low valuations dependent
on what opportunities there are for the land. During marketing
if planning consent is granted or there is another a material
change, we will look at carrying out another valuation. Finally,
if marketing takes longer than six months we will do another valuation
as well.
11. Thank you for that. To wind this up, can
you turn to Page 25, Paragraph 3.15. It says there that cutting
six months off sales taking over 24 months would have brought
forward receipts of £80 million. Can you tell us a bit about
the improvements you intend to make in the future to get value
for money?
(Mr Crisp) Very briefly the context. Firstly, the
Report demonstrates that we do get good value for money. Apart
from the cases where we have had to give prior consideration,
there is only one case where we have not achieved or bettered
the district valuer's valuation and that is only by £800.
What is noticeable about this group that is referred to here is
that what the Audit Office has done is to take those that have
taken more than 24 months. Most sales should be done within that
period and indeed most sales are done within that period. What
happens with those over 24 months is that there are often exceptional
circumstances. They may be particularly big sites. Napsbury is
an example of that. If you look at the Napsbury example it took
some years to sell but in fact the marketing bit of it was only
a relatively small part of it. On these complex and longer term
sales we need to look at them one by one and in doing that to
then pull out the lessons. I do not think the Audit Office is
arguing that you could bring forward all of these sales to two
years. The maximum date we are meant to do them in is within three
years. It also says in some cases you may not want to bring them
forward because that may affect the price. The issue here is let's
look at them all one by one and see if there are particular circumstances.
In these long and complicated sales, I think they are long and
complicated.
Chairman: We had better break there for ten
minutes for a division.
The Committee suspended from 16.21 to 16.27
for a division in the House.
Chairman
12. Perhaps we will start then. Mr Crisp, there
has been a very substantial reorganisation and we all have our
own constituency experiences. How are you going to ensure that
these new strategic health authorities and new primary care trusts
are going to be able to handle the estates in the way we would
all like so they know the property they have and they are getting
the benefit from it as efficiently as possible?
(Mr Crisp) There are two things. The first point to
make is that NHS Estates still exists and their role is still
there to support people and they will be working through into
the 28 strategic health authorities around the country. We have
got a back-up mechanism. The second point is that this sort of
report means that we need to make sure that we draw people's attention
to this more than we have perhaps done in the past. This report
is useful in doing precisely that. I suspect that as we devolve
responsibility more and more to the 300 primary care trusts—they
will be the people who will be the primary landowners within this—that
we will get more local aspects and much better joined up locally.
The strong safeguard is that we have a mechanism which has demonstrated
itself in working with NHS trusts that it will work in the new
world as well.
Chairman: Thank you very much. Mr George Osborne?
Mr Osborne
13. Mr Crisp, people go into the Health Service
because they want to be involved in improving the health care
of people in this country. They do not really go into the NHS
to be estate agents and property managers. Is there a danger that
really people's attention in the NHS is not hugely focused on
this area of the behind-the-scenes, rather dry stuff of the Health
Service?
(Mr Crisp) You are absolutely right, that has been
the traditional position. I hope the first bit of your statement
is the current position, that people are going in there to make
a difference to health, but that means that we as an organisation
need to buy in support where we can, we need to get support, and
we need to build up NHS Estates and other parts of our organisation
to make sure that these services are there. The one structural
thing we have done that is worth drawing out is we have introduced
these new arrangements for controls assurance which is something
which chief executives have to sign off at the end of every year
saying how they have handled a whole lot of infrastructure, accountancy,
probity-type issues. We are putting on chief executives' agendas
estates, fire, health and safety, all of those sort of things,
which in the rush towards improved clinical services can seem
second order, but which are fundamentally important. We have got
that structure as to what chief executives are there for.
14. Has there also been a tendency in the NHS
to regard selling off assets as like selling off the family silver?
(Mr Crisp) There may have been. It is hard to answer
on behalf of the NHS on an attitudinal point. However, we did
identify a very substantial amount of estate which we put into
this retained estate in the 1990s which was clearly identified
as surplus. If you look at the land and property we have been
selling off, you will see that most of it is associated with change
of policy. A significant amount is about large mental institutions
and is where the money has come from. I think that what we have
been doing is sensibly restructuring the estate around the new
service.
15. It is just that I have read an article and
indeed a researcher of mine has spoken to a chap called Mr David
Jones, who is the Chief Executive of the Association of Health
Asset Management. He says: "Within trusts, precious few people
understand asset productivity and those that do understand it
do not care. The focus is on `do we have enough?' rather than
`do we have too much?'" Do you think he is fair?
(Mr Crisp) It does not in the least surprise me that
people in the NHS do not understand concepts of asset productivity
in any technical sense. People in the NHS at all levels do understand
it in the practical sense of trying to get the best out of their
beds and their wards and their property and so on. Where we have
been getting better is in how we make that happen professionally.
That, as I say, is by becoming more professional in how we manage
our assets. We do not need everyone to understand the professional
detail, we need Mr Wearmouth and his colleagues.
16. In his article in the Health Service
Journal he says that there is a gulf between the Department
of Health's policy and action at local level. "There is a
whole section on Estatecode about getting the most out of the
asset base, but when you get down to the ground not many people
know. It is not a subject that gets to the top of the management
agenda. There may be top level interest (I guess he is referring
to you) in rationalising the asset base, but when you get down
to the ground there is a knowledge and ability gap."
(Mr Crisp) I do not recognise the quotation or recognise
what he is trying to do in this particular article or whatever
it is.
17. I will buy you a subscription to the Health
Service Journal.
(Mr Crisp) That is very kind of you. There really
are two points here. The first is does the trust board understand
it. I do not know whether he thinks that is people at the top
or whether that is people at the grass roots, but the important
thing is that the trust board is the people who have responsibility
for the utilisation of all the assets. The important thing is
that we get the expertise there, not lodged in Richmond House
but there. I would not expect it to be lodged at the ward sister
level. I do not know what this chap is talking about and whether
he is saying it is not even lodged at trust management level.
I believe it is increasingly lodged at trust management level.
18. And you are satisfied. Can I turn to another
part of this Report. I want some clarification here. On Page 8,
Paragraph 1.6 of this Report it says that £600 million as
of April 2000 remains as part of the retained estate, ie, the
bit that was not given to trusts. Why has it taken so long for
the NHS to dispose of it? This was property which at the time
five or six years ago was deemed as surplus to requirements and
property soon to be got rid of, so why are you still holding on
to more than half a billion pounds' worth property?
(Mr Crisp) There are a number of reasons for that.
One of them is that quite a lot of that which was declared surplus
was still in use for the time being. Whilst they were declared
surplus in the period 1991 to 1994 roughly, some of those properties
were still occupied by trusts in the short and medium term. There
was an element of that that was straightforward. There is also
the important point about how we planned those sales both so as
not to flood the market but also to provide income over the period.
A set of targets was set each year from—and Mr Wearmouth
can check for me—some time in the mid-1990s each year we
have reached those targets for sales. So actually we have been
selling it at the pace we planned to, just slightly ahead of the
pace we planned to.
19. How much of this £600 million retained
estates are from empty buildings and how much is from places that
are still being used?
(Mr Crisp) Can I ask Mr Wearmouth to answer on that.
(Mr Wearmouth) Out of a thousand non operational sites
that are identified within the Report, 30 per cent are still actually
operational, that is about 300 still operational. We have sold
370 of those particular sites, about 180 are on the market and
the remaining 15 per cent are either to be marketed or have other
issues that surround them, for example town and country planning
issues. Predominantly the majority have either been sold or are
still in use.
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