Q1 Chairman: Good afternoon, welcome to the Committee of Public Accounts. I should start by welcoming Mr Oxikbayev, who is Chairman of the Chamber of Accounts of Kazakhstan, and his colleagues. You are very welcome. Today we are considering the Comptroller and Auditor General's Report Innovation in the NHS: Local Improvement Finance Trusts, which examines a new public-private partnership model for providing primary care facilities which is called LIFT. We welcome the witnesses: Brian Johns, who is Chief Executive of Partnerships for Health; James Stewart, who is Chief Executive of Partnerships UK and Peter Coates, who is Deputy Director of Finance-Investment, in the Department of Health. A general question to start with. What do you think will be the main benefit for patients from LIFT?
Mr Coates: It is certainly a revolutionary way to deliver health care for the NHS and it has brought in an unprecedented investment in primary care facilities to the NHS. To date we have started work on buildings worth £866 million and of that £671 million is through building works and £195 million through enabling money provided by the Department of Health. By the end of the year we think it will be £71 million in further new starts, making a grand total this year alone of £937 million. We think it has improved access to health care in areas of most need, closer to home, with a wider range of services under one roof. The best example of variety under one roof which I can give is in Newcastle which is a place opened this month where there are over 100 services under one roof.
There are the usual NHS one-stop shop services; there are also council house services, a community police station, a job centre and a library. At Colchester and Tendring there will be a renal dialysis unit meaning patients no longer have to travel to London, Ipswich or Cambridge.
Q2 Chairman: Could you look at figure 11, which you can find on page 27 of the Comptroller and Auditor General's Report? LIFT projects are described as attractive to the private sector because they are "low risk", but at 15% are the rewards not quite high? Why are they so high?
Mr Coates: I should like to bring James Stewart in later on, if I may, to discuss what the expected rate of returns are to be, but LIFTs are not particularly low risk for the private sector. For example, if the building is not delivered on time and to budget they bear that risk. In terms of the IR rate of return they make, we obviously benchmark these against rates similar in other contracts within government and we believe that 15% is about the going rate for risk equity in the private sector. Perhaps I might ask James to come in and talk a bit more about equity rates.
Mr Stewart: If you compare equity rates with the PFI market, they are comparable, possibly just a little bit higher. There are two reasons for that. One is that the equity rates you are looking at here are effectively for the first six deals and indeed the rate at which we rolled it out would probably cover the first 20 or so deals. In time future tranches will flow through LIFT and we may well see equity returns come down.
Q3 Chairman: Some criticise this because the private sector is charging quite a lot for occupancy. Do you think that is a fair criticism?
Mr Coates: What do you mean?
Q4 Chairman: For the occupancy. Because their costs are high they are having to charge more. We will bring in a GP in a moment, but some GPs are saying that this is quite an expensive scheme and therefore it may be taking resources from other parts of the NHS. Is that a fair criticism?
Mr Coates: You have to look at what you get for your money and you have to make sure you compare apples and apples and pears and pears in terms of value for money. No doubt we will have a discussion later about what value for money is and how it is measured. I note the Report does say it is quite difficult to compare traditional third party developer developments and LIFT, but we believe that if you take the full life costs of both options and price in the risks we retain in the public sector for third party developers and price in the benefits received from LIFT, the cost per square metre of development is better for LIFT than it is for third party developers.
Q5 Chairman: Can we look at the evaluation now? If you look at page 16, paragraph 1.24, could you tell the Committee why you proceeded with waves 2 and 3 without a complete evaluation of the pathfinder and wave 1 schemes? It seems that there is only a gap of about a year between the pathfinder schemes and actual implementation. Do you think this was a good idea? Should there not have been more evaluation at the time?
Mr Coates: Obviously with the NHS it is a large and rapidly changing market, even more so when government funding is increasing so rapidly. In these situations with large programmes like LIFT you have to be able to be flexible to changing priorities. Officials were asked, the question was put to officials, whether they thought it was a good thing to telescope the programme down to meet our changing priorities and we considered that it was a risk we could manage and take. We did put extra resources into the support programme through the Department of Health and through Partnerships for Health. In hindsight we can look back and say perhaps it worked fairly well. If you look at the number of different services which have come out of LIFT, for example, it would be quite difficult with a single pilot to imagine how many different kinds of service there would be. If we said we would have two or three pilots, we could actually stifle innovation, stifle growth. We do not think it caused any slippage to the overall programme and by and large, with hindsight, we think it was a decision well made.
Q6 Chairman: Could I ask you about co-location now, which is dealt with in paragraph 1.4 on page 10? Could you explain to the Committee the extent to which LIFT has been successful in achieving the desired co-location of primary care professionals and associated services?
Mr Coates: It is policy that we try to bring care closer to home in the NHS. One of the best examples we saw was last Thursday when we went round to the Church Road development and saw there an example where four acute consultants are now stationed regularly in the one-stop shop and able to treat patients locally. I believe that it was said there that doctors were able to refer patients across the room on a contemporary basis as they came in through the door for treatment.
Q7 Chairman: May I just return to evaluation? If you look at recommendation 9, which you can find on page 7, it says "The Department should establish a framework with which it can establish and evaluate the impact of LIFT". Can anyone know whether LIFT is really working in the absence of any proper national evaluation?
Mr Coates: I agree with your sentiment in the sense that this is very much work in progress and we will not know for some time whether value for money and success have been achieved. I would point out that the indicators so far have all been very positive. The Report itself recognises that LIFT is an effective solution, offers value for money and I should be quite happy to run through on a stage by stage basis the indicators we have as time goes on in terms of evaluating value for money and success. For example, the initial competition to select a partner for each LIFT was described in the Report as being robust and successful and overall value for money was judged to be the main criteria for selecting partners. So each trust's partner was selected on the basis of a fair and robust competition. In relation to schemes as they come forward, we have a whole range of measures which we can apply to ensure value for money is secured. We have the business case review system, which ensures all business cases go to the Strategic Health Authority (SHA) if they are above a certain value. The District Valuer, part of the Valuation Office Agency, tests rents to ensure that they are fair. We have professional testing of estimates from the advisers the Primary Care Trust (PCT) employ and, a very important step in terms of the future, some benchmarking work which we are starting with PFH on which I can go into more detail for you now or later if you wish.
Q8 Chairman: May I ask you about the strategic partnering board (SPB) which is mentioned in paragraph 3.15 on page 32. It says there "The accountability of the LIFTCo to the strategic partnering board is well defined. It is unclear, however, to whom the strategic partnering board is responsible. Who holds the strategic partnering board to account? Who makes sure that it is effective?
Mr Coates: The SPB is a cross-organisation body which is designed to sit and discuss the needs of the local economy. We expect and know that the representatives on that panel are the senior members of the various bodies and given that they are all accountable back to their home organisation it is hard to see how one body could hold these people to account, bearing in mind that they are not all NHS employees. It seems to me to be one of these issues of where the buck stops. These are all people who are very senior and they are all accountable back to their boards and putting another layer of control on top of them seems to be-
Q9 Chairman: That is a fair answer, but would it not also be a fair criticism that this is one of those typical schemes which we have increasingly in the public sector where many people seem to have a hand but no hand is dominant, therefore there may be a lack of accountability?
Mr Coates: I accept that there is that risk and the question then is how you track through projects or different schemes to ensure that they are delivered. The process of events is simply that a sponsoring department, be it a local authority or whatever, will take a scheme to the SPB and seek approval for it and agreement that it fits into the necessary plans. Ultimately that scheme is tracked through their own boards and their own accounting structures through to their own responsible officers. Nothing will go into the system unless it is chased through by a sponsoring body.
Q10 Chairman: The LIFT schemes appear to have encountered some resistance from GPs. Why? What are you doing to gain their support?
Mr Coates: I am sure that some GPs will resist change because change itself is a threat and different. There may also be an element of GPs believing that it is more expensive or whatever and there may be an issue around rent reimbursement. All we can do is provide the necessary framework to allow the PCTs to negotiate with the GPs and reach agreement about transferring into the centres if they can.