Q51 Greg Clark: Mr Goodier, is that your recollection? Do you have any recollection as to whether it was important that it was on balance sheet or off balance sheet?
Dr Goodier: Yes, I would agree would Julian Nettel's view of that. At one stage the bridging funding would have amounted to something like 50% of the NHS's capital for that year. It was that sort of quantum. It was huge.
Q52 Greg Clark: Can we just turn to page 24 of the Report, paragraph 3.8? According to the National Audit Office: ". . . the Department considered the proposed land deal was unacceptable because it meant the land purchase would appear on its balance sheet". Has the NAO got that wrong?
Mr Taylor: What we were saying was that on balance sheet it would have been unaffordable at that stage. It was clearly signalled in a letter to the trust organisations, that the potential risk associated with the sum of money involved with an on balance sheet transaction would have meant that, had the scheme come to the Department in that way, it would have been unaffordable.
Q53 Greg Clark: Why would it have been better if it were off balance sheet?
Mr Taylor: Because off balance sheet the costs would then not have fallen directly on the Department's capital vote.
Q54 Greg Clark: It seems a rather complex issue. I have to say any layman reading the Report, when it says ". . . the Department considered the proposed land deal was unacceptable because it . . . would appear on its balance sheet" would regard the answer to the Chairman's question to be at odds with it.
Mr Taylor: I am perhaps being over-defensive about this because there is a sort of theological point at stake here. It is not that we are opposed to on balance schemes, capital schemes, which is sometimes the accusation. The question here was whether, if it had been on balance sheet, it would it have been affordable. At the scale that we were talking about here it would not have been.
Q55 Greg Clark: So where it appears, whether it is on balance sheet or off balance sheet, renders it affordable or not, and that has nothing to do with the value for money offered by this.
Mr Taylor: No, because in practice, we were also raising questions about the affordability at that stage of an off balance sheet scheme. In the same letter which drew attention to that we were also raising wider questions about the affordability of the scheme. It was not a simple proposition.
Q56 Greg Clark: Clearly it was not simple. May I pick up on some of Helen Goodman's questions about the bed numbers and the changes in capacity which were required and invite you to turn to page 20 of the Report? The latter part of paragraph 2.33 says: "Each trust will need to make their own assumptions as to how patient choice and Payment by Results will impact on their future revenues but they have no track record on which to base those assumptions". How can you expect them to do that?
Mr Taylor: As I have indicated, at the time that this scheme was going forward, PBR (Payment by Results) at that stage was not in operation and there was patient choice. At that stage we were telling trusts to take the scheme as it stands and judge it on affordability as it stands and apply some kind of sensitivity analysis to how PBR and choice might operate.
Q57 Greg Clark: "How they might operate"? These are your policies. They are not the trusts' policies. They are imposed on them and yet they have to guess at what the impact is going to be. How can they do that? On what basis can they make that assessment?
Mr Taylor: They have to make that assessment. If you take foundation trusts, for example, which are now no longer directly the responsibility of-
Q58 Greg Clark: Sure, but if it is your policy, should you not have an expectation yourself as to what its impact should be, that you then communicate to the trusts to be able to make their assessment? Why are they expected to fly blind?
Mr Taylor: First of all, in the case of many trusts that would not now be our responsibility.
Q59 Greg Clark: So you have changed your policy on that; that statement in the Report is no longer true. Each trust no longer needs to make their own assumptions. Bottom of paragraph 2.33, page 20.
Mr Taylor: No, it is precisely right. Every NHS trust or organisation has to make some assumptions about how it is going to fare in a world of payment by results and choice. That is implicit in the policy.
Q60 Greg Clark: How do you guide them?
Mr Taylor: In relation to a PFI scheme or generally?