Q111 Greg Clark: I am looking for a comparison between what has happened to construction inflation where the government is paying for it and what has happened when it has nothing to do with the government. Do you have no comparison of that?
Mr Coates: No.
Q112 Greg Clark: Do you not think you ought to?
Mr Coates: The point I am trying to make is that if you map out indices that include and exclude government or PFI they are about the same.
Q113 Greg Clark: Can I ask the NAO about this because this is another feature that comes out in the helpful Report that Mr Trickett found. It says that the Report does not explain why the public sector MIPS has risen so much faster than BMI, nor why PFI costs have increased so dramatically more in the economy as a whole. This goes to the heart of the issue if we are looking at value for money here and we want to know whether this project has proved value for money. It seems on the face of it that the inflation in public sector building has been an extraordinary amount and Mr Coates admitted that this is because of the increase in supply of PFI contracts. This seems to me to go to the heart of it. Mr Coates is going to write to me with some of the specifics, but perhaps the NAO could give us an analysis of this comparison between what happens to the costs when the public sector bills it versus other sectors.6
Mr Burr: Yes, we will certainly provide that.
Greg Clark: Thank you. No more questions, Chairman.
Chairman: Thank you very much. Helen Goodman.
Q114 Helen Goodman: I would like to ask the Chief Executive of the Trust a couple of questions first. Do you have a deficit at the moment?
Mr Forden: In the last five years' accounts-and they are the only five I have looked at recently- there was no deficit within the Trust.
Q115 Helen Goodman: If a deficit were to appear would you be able, under the PFI contract, to cut services in order to meet your financial obligation to break even?
Mr Forden: We would not be able to reduce the costs we pay for the building, the rent or the mortgage, that we would wish to see. We would not be able to reduce the costs of the hard facilities management. We could potentially reduce some of the cost of the soft facilities management but we would have to reduce our capacity in accordance to do that.
Q116 Helen Goodman: So in the event of a deficit the PFI contract would be protected and it would be other areas of service provision to which you would have to look to make savings; is that correct?
Mr Forden: That is correct.
Q117 Helen Goodman: I would like to go back to follow up some of the points that Mrs McCarthy-Fry was making, and I would like to address these to the Department of Health, please. I did not quite understand when you were talking about the code of conduct, was that a voluntary code or a mandatory code?
Mr Coates: It was a voluntary code; it is called a voluntary code but the reality is that would only participate or agree to refinancing as much as we can to protect ourselves if the code was adhered to.
Q118 Helen Goodman: Are you saying that when you initially allow a Trust to make a PFI agreement the provision for a split in the event of refinancing is not written into the original contract?
Mr Coates: That is right.
Q119 Helen Goodman: Even now, even after this experience?
Mr Coates: The refinancing has happened and that is facilitated by an addendum to the contract to allow the share to happen.
Q120 Helen Goodman: I understand that, but my question is you know that a refinancing has happened in this case; you know that it has produced results which are very controversial, but have you written in to subsequent contracts the share that would be agreed in the event of refinancing?
Mr Coates: Yes.
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