Q81 Sarah McCarthy-Fry: So you could have sold it to them on the basis that, "If this one works and you agree a better deal, that we prove this works and you go on to get further work"?
Mr Coates: There is a secondary market in PFI transactions where people want to buy the equity and certainly there is potential for Octagon to sell their equity on after this transaction, as happened at Dartford and Gravesham, where Carrillion sold their equity to another partner.
Q82 Sarah McCarthy-Fry: So you do not feel that at the point of the refinancing there might have been an argument to go to Octagon for the 50-50?
Mr Coates: We did haggle around the share on the extension to the contract but 50-50 was the best we could do. The private sector took the view that they were living with the code and that meant that both sides had to live with the code and do what the code said.
Q83 Sarah McCarthy-Fry: Even though circumstances may have changed since the code was drawn up?
Mr Coates: The code had just been published, from memory, at the time the negotiations were taking place
Q84 Sarah McCarthy-Fry: Can I come back to the extension of the contract term and come back to the Trust. Do you not think that you have brought in a much greater risk by extending the terms of the contract?
Mr Forden: No, our analysis was very much based on the National Audit Office's methodology used for Fazakerley Prison, and on that basis it clearly demonstrates that actually there is a sensible financial decision for the Trust to take, and that is evidenced in the Report4.
Q85 Sarah McCarthy-Fry: I am not talking financial, I am talking in terms of clinical need. With respect, a prison is not the same as a hospital. What are we going to say, with extending the terms for that length of time? If we look back over the last 20, 30 years for things that are required for the infrastructure of a hospital it is radically different now. How have you assessed the risk of whether in the service you are getting you might even have the same sort of building as the requirements you have now?
Mr Forden: That is very much why we are much better in this hospital than we were in the old hospital. The old hospital was built of an original type of construction, which is very inflexible in trying to change for patient need. The design of the new hospital is such that we can actually flex it much more simply, and that is something of which we are very conscious.
Q86 Sarah McCarthy-Fry: If we are looking to the future and we look at the new paper commissioning a Patient Led NHS, which is looking to moving much more out into the community and having less inside the hospital, could you be stuck with a building that is far too big for your requirements, which you are servicing?
Mr Forden: I think if you look at acute care over the past 50 years many times we have actually asked the question, is it likely that the number of patients will reduce? I have not seen it in any year of my analysis yet. I think it is true that some services will move into the community but there are more things that we are doing now than ever before as well, which will have to start off in the acute setting. I think it is just a cycle.
Q87 Sarah McCarthy-Fry: If you look back to your original requirements your bed requirements changed dramatically from when you first drew up the deal to when you closed.
Mr Forden: What happened originally was that it was actually that the regional office commissioned a Report to see how many beds we would need. It assumed that there would be more movement towards community hospitals, et cetera. They made the decision to go with the lower end of the spectrum and that has proved to be not as accurate as it should have been. The Trust's view at the time was that we needed about 950 beds and we actually have 950 beds.
Q88 Sarah McCarthy-Fry: Do you believe that that is enough now on the forecasting you are doing?
Mr Forden: Based on everything we know at the moment, yes, and that allows us also to move down to the 18-week target.
Q89 Sarah McCarthy-Fry: Back to the point, based on what we know at the moment and the point I am trying to make is that things have moved so much over, how can you be sure that what you have now is going to serve you going forward? What processes do you have in place to manage that?
Mr Forden: We try to plan our demand five years in advance. We cannot be certain that it is accurate but we have to take as best educated guess as we can, as you would in any walk of life, whether it was in a hospital or any other field.
Q90 Sarah McCarthy-Fry: To come back to my original point. One of the points that comes in the book is that the Report says that you received a benefit earlier. By closing early you received a benefit earlier and you had the hospital quicker than you would have done. Do you have statistics to prove the clinical benefit of having the hospital earlier in terms of statistics of delivering patient needs?
Mr Forden: We have treated an extra 23,000 patients more each year now than we could in the old hospital in real terms, and that is about a 20% increase. We have reduced our waiting list lower than 10,000 for the first time in 15 years. So I believe that there are real clinical benefits, and we are actually delivering a wider range of services than we ever could as well. We are now moving towards things like interventional cardiology, et cetera.
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4 Note by witness: The methodology of the Prison Service's advisers NM Rothschild & Sons as set out in the National Audit Office's Report on the Refinancing of the Fazakerley PFI Prison contract (HC 584 1999-2000).