Q321 Lord Moonie: I am glad to give you the chance to state that on the record.
Sir Peter Dixon: It is the Camden New Journal having a good time. The Evening Standard picked it up as well: there is not a problem.
Chairman: But on the general question.
Q322 Lord Moonie: On the general point about inflexibility being beneficial.
Sir Peter Dixon: Inflexibility is good in the sense of providing a discipline when it is being built, and this is the point I made earlier, but in terms of changing things subsequently it is difficult. I actually got the magazine Building Today to do an engineering assessment of the hospital to see the extent to which they had designed in maintenance issues in the specification. It came out reasonably, it scored eight out of 10, but that did not stop us running out of air conditioning capacity too early on, it does not stop us being in difficulty with the inadequacy of our lifts, and there is no doubt that to some extent it has been built to a price rather than for longevity. We have to argue with our providers about the standards of maintenance, about the standards of replacing equipment. That is partly a fault of the long term contract and the relationship management within it. We have not cracked that yet. Interestingly enough I was hearing earlier the evidence about the Norfolk and Norwich Hospital and in a conversation I had with the chairman there he said they have actually got a very good relationship with their service provider who feels part of the team. For one reason or other ours does not and that makes it more difficult to get it working, and that is if you like outside the immediate expense issue.
Q323 Lord Tugendhat: I would like if I may, my Lord Chairman, to continue with that theme. As Sir Peter very well knows I am Chairman of Imperial College Healthcare and I look with envy at his new building a very short distance away from our hospitals, and I am grateful to them for looking after my daughter-in-law so well, but when he discusses the point he has just made about the inflexibility, is it your impression that hospitals that were started more recently than yours have less of a problem in that respect or is it, do you think, endemic across the board?
Sir Peter Dixon: I think it is endemic because we all procured to similar rules. The Treasury rules have changed to some extent but the PFI contracts look pretty similar and the arrangements for the subsequent provision of services look pretty similar. Where there is a big difference is in the profit-sharing when there is a refinancing of profit; in the more recent ones the trusts keep more of the refinancing profit if they manage to do it. The Norfolk and Norwich, interestingly enough, was one of the first; they have a better operational relationship than we have with their soft FM provider, but that is probably down to our failure to run the contract properly.
Q324 Lord Tugendhat: As the problem comes back to you would I be right in assuming that if the Government decides that it wants to do something, however desirable-like for instance the blitz on mixed sex accommodation at the moment-it does not in fact take account of what these costs are going to mean to the hospitals concerned?
Sir Peter Dixon: I think that is right. There is another point related to that which is with the sort of discussions that are going on, particularly in London at the moment, about taking care out of the acute sector and into the community, the fact that you have a series of big expensive PFI schemes means that you have to design the rest of the health service around that, so the inflexibility is not just around individual institutions, there is an inflexibility around the system. Whatever else happens in reorganising services in central London my hospital has to stay there because it has a £43 million a year payment to a private provider. You can shut another hospital which does not have that and sell off the land, but you cannot do it with mine.
Q325 Lord Tugendhat: Mind you, shutting it would be quite difficult for other reasons.
Sir Peter Dixon: Of course, but it does mean that you are constraining your set of options and there are other parts of London where I know that has impacted upon the way in which we have looked at the landscape of healthcare across a community. Lord Tugendhat: That is a very interesting point and it widens the area of focus.
Q326 Baroness Kingsmill: Indeed, it is a point that has been made by previous witnesses as well.
Sir Peter Dixon: It is not just about starving other areas of money, it is around having to leave certain things as a fixed point.
Q327 Baroness Kingsmill: Absolutely, and closing things that you can close whilst keeping open things that you may not wish to keep open but have to.
Sir Peter Dixon: Yes.
Baroness Kingsmill: It is a very strong point.
Q328 Baroness Hamwee: Can I return to housing and I am going to ask the question which I am asked to ask without necessarily understanding it in this form because those who are advising us know more about it than I do. The question is about the growth in local authority PFI housing schemes and, with a background in local government, I wish I could see more local authority housing. I am not sure whether this is not really more about housing associations, but is the growth in those housing schemes for mixed communities financially driven or are there wider benefits? As I say, I know bits and I do not quite know where this is driving but I am certain that there is more to it than I understand. There are clearly policy issues around mixed developments.
Sir Peter Dixon: Mixed developments are absolutely sacrosanct, it is the only way to go for the future, a mix of owner-occupation, shared ownership, various rented schemes, affordable rent and market rent, that is fundamentally the way that we should be going with our housing development and if we do not we are going to fail again. I do not think that PFI has a necessary part to play in that, the reason it has any part to play at all is because of the availability of PFI credits to local authorities which I think can form the only contribution which they are able to make to schemes. If they are able to contribute in other ways they can do so and one of the ways they can contribute is obviously about the availability of land. That is critical to it. PFI I do not think is critical to mixed development in any way.
Baroness Hamwee: Thank you, that very much confirms what we have heard from the LGA.
Q329 Baroness Kingsmill: Do you have a view as to whether the developing secondary market- shareholders in special purpose vehicles selling their equity interest-is likely to be beneficial for the public sector?
Sir Peter Dixon: I do not think it matters one way or the other to be perfectly honest. The shareholders in our scheme are pretty irrelevant to us, what is relevant to us is the service provider and not really a great deal else. I do not think it matters a great deal.
Q330 Baroness Kingsmill: The securitisation of risks so far as you are concerned is not going to be an issue that is reducing incentives to worry about long term risk.
Sir Peter Dixon: No. Where we have an interest in what happens to the scheme is around the refinancing of the scheme where initially these schemes, because of the major construction risk, are financed at fairly high interest rates. Once the construction phase is out of the way you are basically financing an income stream and in normal markets there is a different price for it and it is at that point that the refinancing profits accrue. The providers get some and now the trusts get some, not enough I believe, I would like to think we got more of it, but at the moment we cannot do that because the capital markets are in a state. The ownership of the underlying share capital in the SPV I do not think is important. I may be wrong.