Select Committee on Public Accounts Minutes of Evidence

Supplementary memorandum submitted by the National Audit Office


  During its hearing on the National Audit Office's Report "Innovation in the NHS: Local Improvement Finance Trusts" (HC 28, Session 2005-06) on 17 October 2005, the Committee asked the National Audit Office for additional information and analysis which the Comptroller and Auditor General offered to provide in a supplementary report. The following memorandum provides the information and analysis requested by the Committee.

Question 57 (Mr Greg Clark): Primary Care Trust subsidies

  Mr Clark asked witnesses about the extent of subsidies paid by the Primary Care Trusts (PCTs) to tenants in the NAO's six case studies (paragraph 2.14 of the Report). The NAO offered to quantify the extent of subsidies paid in the six LIFT case study areas.

  In four out of six of the case studies, the PCTs did not pay any subsidies to tenants or tenant organisations to encourage them to take space in the LIFT developments. Two did pay subsidies as follows:

    (i)  Ashton, Leigh and Wigan PCT has subsidised Wigan Metropolitan Borough Council (the Wigan Council). These organisations operate a joint financing pot for some joint initiatives. The Wigan Council space in the Lower Ince development is funded from the pot from April 2005 until March 2007. A subsidy of £839,000 will be paid by the PCT over this period. From thereon the Wigan Council will pay for the space from its central funds. The PCT agreed that the pot could be used to fund Lower Ince to encourage the Wigan Council to take space in the building, which it otherwise could not have afforded. Wigan Council was thus able to be involved in the project from its inception with a two year window to find the money that it needed to fund the tenancy.

    (ii)  Newham PCT in East London agreed to give a subsidy of £7,500 per annum for two years to Care Navigators to use space in the Manor Park centre. The Care Navigators are employed by Newham University Hospital National Health Service (NHS) Trust. They help people with long term health conditions access a range of health, social and voluntary care services, tailored to the individual's particular needs, to help them manage their conditions. The Care Navigators also assist with referrals around the various professionals located within the LIFT building.

Question 75 (Mr Jon Trickett): Recent primary care developments and comparators to LIFT

  Mr Trickett asked how LIFT compared with publicly funded primary care facilities. No public sector comparators are prepared for LIFT schemes. The NAO agreed to provide information on schemes funded directly by the NHS for comparison with LIFT.

  The NAO has produced the list below from the most detailed available information held centrally by the Department of Health (DoH). It gives information on comparable developments (ie one stop primary care centre schemes) between 2000 and 2004, prepared by the Estates division of the Department of Health, and has analysed this by the different routes under which they were procured. The funding route for many developments is not known. The list shows that 31 out of 588 developments are known to have been publicly funded.

  A summary of the total developments for each Strategic Health Authority and funding mechanism, where it is known, is provided in Table 1.

Table 1

Strategic Health Authority Total number of developments 2000-04 Type of development


Third party1

Other/not known2
North East London80 004 4
South East London60 100 5
North Central London7 0030 4
North West London110 010 10
South West London150 0110 4
Kent and Medway10 010 0
Surrey and Sussex210 0120 9
Thames Valley180 0110 7
Birmingham and the Black Country28 102 322
Coventry, Warwickshire, Herefordshire and Worcestershire 702 005
Shropshire and Staffordshire31 230 125
Cheshire and Merseyside33 2206 23
South Yorkshire120 023 7
West Yorkshire280 007 21
North and East Yorkshire and Northern Lincolnshire 4638 10025
Greater Manchester180 007 11
Cumbria and Lancashire14 0007 7
Avon, Gloucestershire and Wiltshire25 303 118
Dorset and Somerset14 0130 10
South West Peninsula22 2131 15
Hampshire and Isle of Wight19 502 012
Leicestershire, Northampts and Rutland22 316 111
Trent392 173 26
Northumberland, Tyne and Wear34 304 225
County Durham and Tees Valley29 536 015
Norfolk, Suffolk and Cambridgeshire44 000 044
Bedfordshire and Hertfordshire16 000 016
Essex200 000 20

588 312387 46401

1  Third party developments are those where a private contractor develops primary care premises on behalf of GPs or PCTs.

2  Other & not known includes: (i) grants to owner-occupier GPs who have borrowed to purchase, build or refurbish premises; and (ii) improvement grants including for extensions and alterations to comply with the Disability Discrimination Act.

  The NAO asked each of the PCTs within the six LIFT case study areas to supply details of comparable publicly funded primary care facilities. None of the PCTs could identify any such developments.

  The Sandwell LIFT scheme, however, was able to provide comparable data between a third party scheme that was developed concurrently with a LIFT scheme. The third party development known as the Lyng Centre for Health and Social Care (the Lyng Health Centre) opened in June 2005. It replaced the Cronehills Health Centre and is a one stop primary care centre. The most comparable LIFT development is the Oldbury Health Centre which is the largest of the three first tranche LIFT developments in Sandwell.

  A cost comparison of Oldbury Health Centre and the Lyng Health Centre is shown in Table 2.

Table 2


Oldbury Health Centre (LIFT)
Lyng Health Centre (Third Party Development)
Capital construction cost (£ million) 4.112
Square metres2,2605,760
Rental charge £/m2229 195
  —  construction and finance 151178
  —  facilities maintenance1 1617
  —  lifecycle21 n/a
  —  partnering/LIFTCo management2 33n/a
  —  recovery of bid costs3 8 n/a

1  Maintenance in LIFT is inclusive of all maintenance across life of building, whereas under a conventional lease only scheduled maintenance is included.

2  Partnering and LIFTCo management costs relate to business set up costs.

3  LIFT bid costs reflect that an exclusive contract for 25 years has been awarded to the LIFTCo. The rules on the number of schemes over which bid costs could be spread mean there will be no bid costs from scheme 7 onwards. This cost could otherwise be spread over developments for 25 years.

  It is not possible to generalise from one example but the comparison demonstrates some interesting points. In this case construction and finance costs were 15% less per square metre in the LIFT development than in the third party development. The rental charge, adjusting for lifecycle maintenance costs which are not included in the Lyng development, was around 7% higher than in the third party development. Some differences between the LIFT Lease Plus Agreement (LPA) and a conventional lease could not, however, be taken into account in the above analysis. Unlike a conventional lease, LIFT rentals include all maintenance and repairs and can only be increased annually by the Retail Price Index (RPI). The capital costs associated with maintaining LIFT premises are, therefore, spread evenly over the 25 year contract period.

  Comparisons between rental costs under conventional leases and the Lease Plus Agreement in LIFT are also problematic because of the different risk profiles. For example, in LIFT the tenants enjoy a greater degree of sanction against the LIFTCo than they would against a third party developer. In the event that the LIFTCo fails to carry out maintenance, the tenants can carry out the necessary work themselves and deduct the costs from the rent. Similarly, if an area of the building is unavailable for use the tenants are able to make deductions from the rent for that period. Moreover under a conventional lease, the tenant takes on the risk that defects appear in the building and that maintenance is more expensive than predicted.

Question 93-97 (Mr Richard Bacon): Population information

  Mr Bacon referred to the PCT population data provided in Appendix 2 (p 38) of the Report by the Comptroller and Auditor General. This data refers to the total number of patients registered with the PCTs in the LIFT case study areas, as set out in their initial Strategic Service Development Plans. Mr Bacon asked whether the NAO could also supply for each case study scheme details of the number of patients registered with LIFT General Practitioners (GPs).

  Data from the LIFT case studies (broken down by individual PCTs within the scheme where applicable) as at January 2005 is presented in Table 3.

Table 3


PCT patients
Patients registered with GPs in

Tranche 1 LIFT premises
% of patients served by GPs in Tranche 1 LIFT premises
East London LIFT752,924 27,9273.7
Newham PCT314,95627,927 8.9
Tower Hamlets PCT230,000 001
City & Hackney PCT210,000 001
East Lancashire LIFT504,602 74,56014.8
Burnley, Pendle & Rossendale PCT252,132 13,5605.4
Hyndburn & Ribble Valley PCT115,000 33,00028.7
Blackburn with Darwen PCT137,470 28,00020.4
Ashton, Leigh & Wigan LIFT301,419 32,32010.7
Barnsley LIFT237,973 38,56116.2
Sandwell LIFT320,348 20,2996.3
West Bromwich & Wednesbury PCT121,445 3,5012.82
Oldbury & Smethwick PCT110,801 13,08011.8
Rowley Regis & Tipton PCT88,102 3,6484.1
Barking & Havering LIFT418,518 35,3558.4
Barking & Dagenham PCT171,000 17,20010.1
Havering PCT247,518 18,1557.3

1  While both Tower Hamlets and City and Hackney PCTs were partners in the East London LIFT scheme, the initial development was one building in Newham.

2  The Birmingham Road scheme and the Whiteheath schemes in Sandwell relocated a single handed practitioner and a small practice both of which had smaller patient list sizes than other case studies. The focus of these schemes was less on GP provision and more on provision of wider primary care services.

Question 97 (Mr Richard Bacon): Cost of LIFT accommodation relative to total PCT funds for primary care accommodation

  Dr Kohli, a GP working in the Manor Park LIFT building in Newham, East London, was invited by the Committee to appear as a witness following concerns he expressed to members of the Committee during a visit to the health centre about the affordability of LIFT developments. Dr Kohli submitted to the Committee a written statement and an analysis of the estimated 2005-06 cost of rents in LIFT premises per registered LIFT patient and rental costs in other primary care buildings per registered patient, based on information provided by Newham PCT (Ev 17-18).

  Mr Bacon asked the NAO to prepare an analysis on a similar basis for all the case studies covered in the Report. Table 4 sets out comparable information for 2004-05 as it was difficult to obtain estimated 2005-06 information for the other PCTs.

Table 4


LIFT area

Actual PCT funding for primary care accommodation 2004-05 (£)

Average annual cost per patient (£)

PCT funding for GP premises in LIFT buildings in 2004-05 on a annualised basis (£)

Average annual cost per LIFT

GP patient (£)
East London 10,708,000 14.22422,76028.73
East Lancashire 2,815,000 5.582,451,48032.88
Ashton, Leigh & Wigan 2,081,000 6.90967,23829.23
Barnsley 934,0003.92 635,37616.48
Sandwell 1,229,0003.84 635,40031.41
Barking & Havering33,432,000 8.2000

2005-06 figures for Newham provided to PAC by Dr Kohli4
Newham PCT3,223,099 10.20899,18032.20

1  Patient numbers are derived from Table 1 of the C&AG's memorandum, Ev 19.

2  Column D details the annualised PCT funding of GP accommodation for tranche one LIFT buildings for 2004-05. The LIFT funding has been annualised as, in some instances, the buildings only opened during 2004-05. LIFT funding is comprised of the annual rental charge payable by the PCT for premises and forms part of each PCT's overall primary care accommodation funding as detailed in Column B.

3  In 2004-05 the Barking & Havering LIFT building was fully occupied by PCT staff providing clinic services.

4  Dr Kohli provided the Committee with 2005-06 figures for Newham after discussion with the PCT (paragraph 3.1 above). The PCT revised those figures in the light of more up to date information.

  It is difficult to draw conclusions from the above analysis as LIFT premises are new, purpose built and in excellent condition and generally provide more useable space than the existing stock of PCT premises, which are typically much older and in poorer condition.

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