Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 40-59)


17 OCTOBER 2005

  Q40  Ms Johnson: Just switching a little bit, I want to ask you about the non-executive chairmen you are appointing. The Report is indicating that there is a problem with recruitment and at one stage one of the LIFTCos did not actually have a chairman. What is the problem about recruiting somebody to be a LIFT chairman?

  Mr Johns: I do not think there is so much of a problem. When the Report was written by the NAO, there was certainly one area which had not appointed a chairman of the LIFTCo and that changed afterwards. They have had a chairman. The task for the LIFTCos is to make sure that they get a chairman who has the appropriate skills to balance the public and the private sectors on the boards of LIFTCos to make sure that fair play is seen for both sides. I think the Report notes that inevitably a lot of hard work was put into place to get the LIFTCos established in individual areas and to get the individual schemes closed. People's attention focused more on that and they did not focus attention on getting chairmen. Since then we have chairmen of both the LIFTCos and strategic partnering boards across the country.

  Q41  Greg Clark: The funds committed by central government are in the region of £195 million to kick-start the initiative as I understand it. Why are they needed?

  Mr Coates: First of all there is the very simple incentivisation point to encourage economies to think of new ways of doing things and one of the most successful ways of encouraging change is to provide funding to help that. More importantly, these things often require strategic change and major investment at the beginning of the process to allow, for example, land to be bought to build new facilities on. It is as simple as that.

  Q42  Greg Clark: If it is for land for facilities to be built on, then it is not kick-starting, I assume that would be the case in any rollout of a LIFT.

  Mr Coates: I accept that point, but I think the point I am trying to make is that when you have a new initiative you do tend to meet similar obstacles around why things cannot be done and one of them is that they do not have the money to do X, Y or Z. So we try to anticipate that by making sure money is available to help these changes happen.

  Q43  Greg Clark: This is an important point about the sustainability, is it not? This is kick-start funding, then there may be a case to provide some funds to publicise it, to get people to know about it. If the funds are actually needed to buy the land to make it viable, then why can we assume that this will not be necessary in any future rollout of the programme?

  Mr Coates: The wave we have just announced, the fourth wave, does include the same degree of enabling money as the first three waves. The thing which has changed, perhaps to get underneath your question, is that when we started the new LIFT initiative the tendency was to keep central funds for these things in terms of very large central budgets to facilitate change. Since then these budgets have now all been devolved out to the NHS and if similar programmes were envisaged we would expect local economies to fund much more of the enabling work and our money would be much more around the edges rather than the core of making things happen.

  Q44  Greg Clark: You changed the terminology from "kick-starting" to "enabling". Does this accept that actually these programmes are going to need funding for the purchase at least of the sites on an ongoing basis?

  Mr Coates: I personally do not see any difference between "kick-start" and "enabling".

  Q45  Greg Clark: There is no difference between them.

  Mr Coates: No. In my own terminology it is to make things happen.

  Q46  Greg Clark: If it has been kick-started, it is now enabled and there is no reason at all for changing.

  Mr Coates: I am sorry, I do not see a difference. In my terminology enabling money is a way of kick-starting initiatives.

  Q47  Greg Clark: So it is all the same.

  Mr Coates: Yes, in my terms.

  Q48  Greg Clark: Does the kick-starting/enabling money continue then for the full rollout of the programmes as far as you see it or is it just for these early phases?

  Mr Coates: Just the early phases.

  Q49  Greg Clark: According to the Report you expect to get the money back.

  Mr Coates: When we started the process we did reserve the right to take money back to prevent silly use of it all and unnecessary use of enabling money, but the reality is that only a very, very small amount of money had been taken back from the PCTs. The only one I am aware of is that £½ million was taken from Newcastle, who said they had no need for the money, and reallocated to Plymouth.

  Q50  Greg Clark: How much money has been taken back so far?

  Mr Coates: £½ million. That was re-allocated to Plymouth from Newcastle.

  Q51  Greg Clark: Over the maturity of the projects what percentage do you expect to be taking back?

  Mr Coates: None. Having gone, it has gone. We are not going to take it back at the centre.

  Q52  Greg Clark: But you have taken £½ million back to recycle.

  Mr Coates: Yes, that was in 2004-05. At the end of each year we do an application of funds test, how much money has been spent, and at the end of 2004-05 Newcastle volunteered that they had funds they could not expend on enabling work. That money was re-allocated to Plymouth on the basis that they had a need, but there is no programme to recover these funds and now they have gone out to the NHS they will stay there.

  Q53  Greg Clark: Just thinking about the PCTs' additional rent subsidy, what is the total value of subsidy paid by PCTs to LIFTs so far?

  Mr Coates: I am afraid I cannot answer that question. I do not have the information with me and if you want it I shall have to give you a note I am afraid.

  Q54  Greg Clark: Is it in hundreds of millions, tens of millions, thousands?

  Mr Johns: When you say "paid in subsidies to LIFTCos"—

  Q55  Greg Clark: Yes, paragraph 2.14 of the Report says that PCTs have sometimes had to subsidise occupants of the LIFT premises in order to persuade them to go in.

  Mr Coates: I think this is in relation to pharmacies in particular. This is not a particular power for LIFT, it is a power PCTs have generally to allocate funds to support pharmacies in areas. I have no idea, and I am not sure we collect the information centrally, how much is actually paid out by PCTs in this area.

  Q56  Greg Clark: Sir John, did your investigators put a figure on this? This is a significant use of public funds.

  Ms Leahy: No, we looked at six case studies in detail and in some of them subsidies were given, though I am not sure that we knew at the time exactly how much would be given. It was a decision in principle. My recollection is that it was relatively small amounts of money compared with the overall total.

  Q57  Greg Clark: How big? How much is "small" in these circumstances?

  Ms Leahy: I do not have any specific figures though I am sure that I could go and find them.

  Sir John Bourn: We could, with the witnesses, let the Committee have a note on that.[3]

  Q58 Greg Clark: We have a situation in which, in order to make the schemes work we need funds from central government, kick-starting/enabling funds. We sometimes need funds from PCTs to subsidise the operations, but we do not know how much, all of which come from health expenditure totally. We have a situation in which GPs, according to the Report and according to Dr Kohli here, are not always enthusiastic about the costs of the premises; they need to be persuaded to go in them. In fact paragraph 2.14 of the Report seems to have quite an extraordinary approach. It says "There is a common perception from these groups of prospective tenants that the higher cost of LIFT, compared to current rent payments, outweighs the benefits". But then the next line takes us into a strange realm. The response to this seems to be "The Department worked hard to address this through creation of GP champions for local areas and by hosting forums for GPs to understand the issues". Could it not be the case that actually GPs do understand the issues and they do not think these are terribly good value for money? Appointing champions is not the way to address it: we need more effective scrutiny of these costs.

  Mr Coates: If GPs generally feel that these facilities are too expensive, I think the result would be that we would find it impossible to find tenants for the properties over time. The evidence is that once negotiations open between GPs and the PCTs about the benefits of a location and co-location, GPs are persuaded that any additional cost is worth the investment.

  Q59  Greg Clark: Is not the truth that the reason they are persuaded is that they have to be bribed in effect, using health funds which might be spent on waiting lists. My own PCT has long waiting lists for various procedures and I should be alarmed if this was actually being spent persuading GPs to make a rational assessment of the costs, to decide that the rent is unaffordable, that these limited funds are being used to persuade people to go into bright shiny buildings rather than getting tests for people who are on waiting lists.

  Mr Coates: I do not see this as a bribery issue; I see it as a case for enabling the health economy to make changes.

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