Examination of Witnesses (Questins 20-39)
CABINET OFFICE,
DEPARTMENT OF
HEALTH & HM PRISON
SERVICE
12 DECEMBER 2007
Q20 Dr Pugh: I see, so all they are
offering is a way to get to NHS Logistics rather than in direct
competition?
Mr Coates: That is correct.
Q21 Dr Pugh: Thank you for that.
As I understand the arrangements, when a trust signs up for shared
services they pay a fixed rate and that is adjusted each year,
for various understandable reasons such as inflation but in predictable
ways so they know what they are paying. They are not guaranteed
a saving though, are they?
Mr Coates: The contract they sign
with Shared Business Services is based on a baseline of costs
on their existing costs and their new costs and that new baseline
cost is 20% guaranteed less than their existing levels.
Q22 Dr Pugh: But it is not an unconditional
guarantee, is it? As was explained to me yesterday, it is a guarantee
that if they do what it is recommended for them to do, they will
make that sort of saving?
Mr Coates: That is absolutely
right in the sense that the savings will only fall out if the
trust makes the changes to its systems necessary to generate the
savings. You do not just take the old systems and replicate them
and charge 20% less.
Q23 Dr Pugh: In a sense, they are
offered an opportunity. If they do not take that opportunity up
they will not be considered to have made best use of the deal,
but it does give the opportunity for the shared services outfit,
as it were, to say it is their fault that the savings were not
made?
Mr Coates: Yes, but we also work
with the trust in terms of assurance programmes to help them realise
the savings that are projected for them, so we do not leave them
to it.
Q24 Dr Pugh: I have come across the
figure of a net saving of £250 million. Is that a net saving
of £250 million to trusts or to the NHS?
Mr Coates: That is from the taxpayers'
perspective. You are talking about table 7 on page 18?
Q25 Dr Pugh: Yes, and how is that
composed?
Mr Coates: That is composed partly
of savings to the trust and partly cash coming into the department
in the way of payments and dividends and such like.
Q26 Dr Pugh: So it makes presuppositions
about dividends?
Mr Coates: Yes it does.
Q27 Dr Pugh: And if those dividends
do not arise you do not make that saving?
Mr Coates: That is absolutely
right, yes.
Q28 Dr Pugh: And how much money have
Xansa made in dividends so far?
Mr Coates: The same as the Department,
which is nothing.
Q29 Dr Pugh: Which is nothing, so
it really depends on this profit-sharing deal working in some
way, does it not?
Mr Coates: Yes.
Q30 Dr Pugh: Clearly what is absolutely
crucial for their business now is to get more people in the deal,
is it not?
Mr Coates: Yes.
Q31 Dr Pugh: And if they do not get
more people in the deal there will not be very much profit?
Mr Coates: The break even point
for them is another 22 customers, as I understand, 22 clients,
before they are breaking even.
Q32 Dr Pugh: So if Xansa carry on
with the same number of clients they will put their capital in
and they will just be bumping along at break even point, will
they not?
Mr Coates: Yes, they are bound
for five years into the contract to keep delivering their service
to the JB.
Q33 Dr Pugh: So in order to engineer
these savings the NHS really need more people in the deal, do
they not?
Mr Coates: We do, yes.
Q34 Dr Pugh: Is there going to be
any coercion put upon NHS trusts to actually sign up for this
given that the NHS itself needs them to do so?
Mr Coates: There will be no coercion
on trusts. Trusts will be persuaded and incentivised to join but
they will not be coerced.
Q35 Dr Pugh: There has been some
resistance from the foundation hospitals, has there not?
Mr Coates: There has been resistance.
There are some foundation trust clients, but foundation trusts
and acute trusts generally are more resistant.
Q36 Dr Pugh: They value their financial
independence, do they not?
Mr Coates: It is a perception,
I think, rather than a reality but they do, yes.
Q37 Dr Pugh: It is the Government's
intention to have more foundation trusts, is it not?
Mr Coates: It is.
Q38 Dr Pugh: So it will get more
difficult rather than easier to get people in?
Mr Coates: That is possible, yes.
Q39 Dr Pugh: You have got NHS Professionals
in already. Did NHS Professionals put out on open tender and Shared
Business Services apply in this case, or were NHS Professionals
subject to a degree of arm-twisting?
Mr Coates: They were persuaded.
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