Examination of Witnesses (Questions 20
- 39)
MONDAY 15 APRIL 2002
MR NIGEL
CRISP AND
MR PETER
WEARMOUTH
20. It must cost quite a lot to just maintain
them over the years you have been waiting to get rid of them?
(Mr Wearmouth) That is true, that is why we attempt
to sell the property as fast as we possibly can.
21. You do not know how much of a cost there
has been maintaining these £600 million worth of retained
estate?
(Mr Wearmouth) On average the actual costs of consultancy
and maintaining them runs at around £35 million a year. Of
the £600 million we have disposed of £200 million of
that in the last two years and the remaining £400 million
is in a one off sale as identified in the NHS plan and we are
on the disposal of it at the present time.
22. If I could turn to another issue. I am correct
in saying one of the incentives you give to trusts to dispose
of property is that they get to keep some of the proceeds of the
sale, that is correct, is it not?
(Mr Crisp) For part of the estate. There is a bit
of the estate which is surplus which then passes to the Secretary
of State but the bit which is retained by trusts, you are quite
right.
23. If one of the reasons why the NHS has to
constantly juggle its assets is because of changing health needs
of the country and the changing health practices, one of the changes
will be demographic changes. We are all familiar with the arguments
about Central London hospitals for example. Is there not a danger
that if you are letting the trust retain the money, does that
not defeat the object of trying to allocate the resources elsewhere
in the health service?
(Mr Crisp) There are two points. On the retained estates,
which is the £600 million we were talking about —
24. Yes.
(Mr Crisp) — that is all within the Secretary
of State, that is national.
25. I understand.
(Mr Crisp) In terms of local money, trusts can sell
property up to a million pounds without permission. Over a million
pounds they have to put a business case to us suggesting how the
money should be reinvested so that we have to agree that. Now
the money is not automatically reinvested, the money can be moved
elsewhere.
26. In paragraph 2.19 of this Report, it talks
about your "earned autonomy" trust.
(Mr Crisp) Yes.
27. "If sales net more than £5 million
then these top performing Trusts will retain £5 million and
the surplus will be available for use within the health economy,
subject to submission of a business case. This is expected to
act as an incentive...". Do you see the point I am getting
at? There are various empty properties precisely because there
are not the same health needs in the area. You dispose of them,
you get a lot of money and you are just ploughing them into an
area which does not have the health needs but it has the cash.
(Mr Crisp) I understand the point entirely and anywhere
where you shift incentives you shift behaviour a bit. Let me just
put it in context. The context is that land sales each year are
of the order of £350 million and capital investment is of
the order of £3 billion. Actually, whilst we may be shifting
incentive and behaviour on a proportion of that £350 million,
it is a small proportion of the overall capital investment. I
do understand the argument "Why should wealthy X place retain
something when actually we have a need elsewhere". That is
why on, whatever that is, 85 per cent of capital investment, we
take the view on a national perspective. There is some local incentive
but national otherwise.
28. You referred, I think it was you, I cannot
remember, in the opening questions from the Chairman to the organisational
changes in the NHS which may have delayed the implementation by
some trusts of their plans.
(Mr Crisp) Yes.
29. Do you have any figure you can put on how
much that might have cost the NHS, the delay in getting these
plans into place?
(Mr Crisp) No, that is not a question that I have
asked. If I take the current position, we have a number of new
organisations which came into existence at the beginning of this
year. They will not be able to say that they have got an estate
strategy in place in the sense that we are talking about until
they have worked through that strategy of their predecessors and
had it signed off by their boards. Now actually they have probably
inherited the estate strategy of their predecessor, do you see
what I mean? It is the same point that I think Mr Wearmouth has
made that actually 97 per cent of trusts have given reports to
their boards. You will inevitably have a start up period of a
few months before everything has gone through the board in the
appropriate fashion. I do not think we will see anything significant
in terms of sales delayed by that.
30. It says in paragraph 2.11 that nine NHS
trusts in response to the NAO survey "... volunteered information
suggesting that pending mergers would delay improvements to their
strategies." Then if you look on the opposite page you can
see various projections of the cost of not having an estate strategy
in certain trusts. For example, one is looking at paragraph 2.7,
a cost of £116 million in the first bullet point and £102
million.
(Mr Crisp) Yes.
31. There might be a cost to the organisational
change but maybe an unpredicted cost in the implementation of
estate strategy.
(Mr Crisp) If you look at page 15, which is the one
with 2.10 on it, the bottom right hand corner, there are nine
NHS trusts without a strategy "... did not say when they
would achieve an exemplar strategy". I am not sure if those
are exactly the same nine but I have asked about those nine and
I am told that five of those trusts no longer exist, three have
strategies and one is in the process of developing a strategy.
That is just an example of where the questioning throws up the
fact that trusts are about to go out of existence.
32. I will ask the NAO if they are the same
nine?
(Dr Robertson) Yes.
33. The nine in the diagram are the same nine
in 2.11? "Nine NHS trusts in our survey volunteered information
suggesting that pending mergers would delay improvements to their
strategies".
(Dr Robertson) Yes, they are.
(Mr Crisp) Undoubtedly they will be affected by organisational
change.
Mr Osborne: No further questions.
Mr Steinberg
34. I have only got one or two questions, I
am not going to take up my 15 minutes here simply because I am
not really in sympathy with the Report at all. I am a little uneasy
about it all to be quite honest. The Report is written from the
perspective of the National Audit Office who are auditors, who
are out to make as much money as they can for the Government and
for the taxpayer but I look at it a different way. Clearly the
National Audit Office in the Report and yourself want to see the
maximum sale of surplus property and surplus land. You want to
see the receipts coming in because you believe that is an asset
that is there to be sold. I can remember in the 1980s and the
1990s when there was a rush to sell off playing field land and
local authorities were forced to sell off their land and ten years,
15 years later, there are some nice housing estates around but
there are no playing fields and kids if they go to a secondary
school no longer have the privilege of being able to play football
or rugby or whatever on fields because they are no longer there,
it has happened in my area. I have this great worry that this
could be happening here. My question is not only to you Mr Crisp
but also to the National Audit Office. How can you persuade me
that it is to the benefit of the British taxpayer that we actually
do sell all this land without thinking what the everlasting problems
might be or what the situation might be in the future?
(Mr Crisp) Which one first?
35. Either?
(Sir John Bourn) The first point to make of course
is that the Auditor is not concerned with policy, it is the policy
of the Government to do this. It is then for me to look at how
well they do it. The second point that I would make here is that
we are not in our Report advocating that people should sell off
what they might really need. What we are saying is that you should
have a proper examination of the property that you own, decide
if there is any property that is surplus to your requirements
that you are not using, that you cannot see a use for, and then
see how that can be released into other economic sectors, thus
bringing into the National Health Service the money that is raised.
So rather than keep assets in a form that you are not using and
do not anticipate a use for, better, given the fundamental purpose
of the National Health Service, to translate those assets into
resources that you can use for front-line care. That is really
from those two points of view how we have looked at this matter.
(Mr Crisp) I agree with that. That is how we have
looked at it as well. The key point here is "surplus to requirements".
There are a couple of figures I could give you that would reinforce
it and Mr Osborne may think it is a reply to his question as well.
71 per cent of sales have been mental institutions and 27 per
cent have been replacement hospitals, where we have built a new
one and sold off the other, and only two per cent have been others.
The sales of land over a five-year period have been very concentrated
in those policy areas. We have not been selling off the core and
there is an argument that we should be looking more closely at
our asset utilisation, as Mr Osborne has said, in that. That is
how we have been looking at it. This money is then all re-invested.
36. I appreciate that. Sir John seemed to say
that what the Report is saying is that land that cannot be foreseen
to have a use in the near future is the land that is envisaged
should be sold, but what do you mean by the "near future"?
I am not sure you used that phrase.
(Sir John Bourn) No, I did not!
37. What were you actually saying?
(Sir John Bourn) What I am saying is of course that
if you think that there will be a use for it, even if you —
38. What is the timespan of whether there is
a use for it or not? 10 years, 20 years or 30 years?
(Sir John Bourn) I do not think it is for the external
auditor to try and lay down these timespans. What the external
auditor can do is say think about this. If there is uncertainty
and the possibility of using it within a reasonable period—and
it is not for us to say what would be reasonable because we do
not know the circumstances of individual cases—what we have
said is think about this, think about it carefully because you
may have a lot of resources tied up in something that is producing
no benefit for the National Health Service. So it is really an
encouragement to thought, care and planning.
39. Mr Crisp, how do you judge, if that is the
case, what land may be needed in the near future or far future
or whatever? How do you judge that? You were talking about mental
hospitals but what about surplus land? In the Report there was
a pie chart (I am not sure which page it was on) which gave you
a percentage of buildings and land and land was approximately
ten per cent.
(Dr Robertson) Open land 7 per cent and 13 per cent
"other land and buildings."
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