Q71 Jon Trickett: At the end of the day, certainly I as a Member of this Committee, expect to be able to have some kind of financial analysis. I accept that value for money is all about quality of service delivery, but with Dr Kohli saying that the costs of the scheme, and generally this is a GP view, tend to be very high and the fear therefore that money is being diverted into LIFT schemes from other types of financing I would have thought you would have thought that the Committee would be interested in the financial implications. In the London improvement zone mainstream NHS grant funding is available for enhancements to GPs' surgeries. What analysis have we done as to the cost of that relative to the cost of the LIFT scheme? Surely it would have been a direct real life comparison for us to analyse whether LIFT was giving us value for money in financial terms or not?
Ms Leahy: The private development schemes are usually done in many different ways.
Q72 Jon Trickett: This is not a private development, this is NHS grant, mainstream funded. Has any work been done on that? Public sector comparators can be either conceptual, as they often are, as we have debated many times, or they can be based on real life experiences. There are real life experiences inside London. There is no reference in this Report, no evidence that the NAO was aware of that. There is no attempt to build a comparator. Frankly this document is simply unsatisfactory. I could not possibly say, nor could anybody frankly, that this document demonstrates value for money. Mr Coates actually said-and I wrote down his words-"We will not know for some time whether value for money and success have been achieved" or not. Those were Mr Coates's own words; I wrote them down. Given that statement, does this Report, in your mind, demonstrate value for money? Sir John, I want to put you on the spot.
Sir John Bourn: I think you make some good points about our financial analysis and I recognise that, although Ms Leahy has given some replies, we have not been able to take you with us. I will also say that we do echo your fears and also what Dr Kohli said because we have mentioned, for example in recommendation 9, the importance of actually evaluating whether these projects do turn out to provide value for money. We may not have been able to convince you that so far they have, but we certainly stand with you on the need for a framework, an evaluative arrangement to see how they work out in practice and to Report to the Committee on whether they work out well or badly.
Q73 Jon Trickett: Is it possible that you knew what the answer would be if you did a financial appraisal and therefore you have adopted a methodology which actually avoids posing the very difficult questions as to whether these are developing value for money at all? That is the conclusion I have come to. You have side-stepped it.
Sir John Bourn: That is not how we approached it, but I take the points you make and I shall reflect about them.
Jon Trickett: I just feel that this NAO Report takes a major step, a step change from quantitative analysis based on a financial appraisal through to a qualitative analysis such that it is impossible for this Committee to express a view. Here we are asking a range of stakeholders, all of whom have a stake in the success of this scheme, what they believe has happened. These are the views of people. It is not an objective quantitative appraisal of the kind I would expect to come before this Committee. I protest actually about the way this has been put before us. Certainly I shall not be agreeing to this.
Chairman: Is that a fair criticism, Sir John? We do not often have this sort of questioning put to you and that is why it is very important that it is taken very seriously.
Jon Trickett: Particularly, Chairman, given the fact that we have used a contractor who is up to his neck in the LIFT schemes to advise the Committee.
Q74 Chairman: Is there anything more that you feel you could have done to provide some quantitative as opposed to qualitative assessment to this Committee?
Sir John Bourn: I would defend the use of a contractor. The fact that a contractor works in an area means that he becomes expert in it and it does not mean to say that he is only concerned with one of his customers. He is a professional person and he is concerned with a range of customers. I take the point that one could have taken a number of particular schemes and compared the cost of those with the ones which have come out of LIFT and one could certainly have done that. Of course what you would have had would have been a range of schemes which cost different amounts of money, partly perhaps because they were funded in different ways, but partly also because they were in different circumstances. One of the points about the whole of PFI in the National Health Service is that the government does not say that PFI is going to be cheaper. It recognises this and is prepared to pay over the odds to get it. Clearly I regret the fact that we have not taken Mr Trickett with us, but I would also make the two points that I have mentioned: you are going to find in some of these schemes that they are going to cost more doing it that way. We have also said that for the future it is necessary to have an evaluative framework which does not exist yet. I accept that we could have done this better, but I argue that the main points are there and ones which ride into the future justifiably.
Q75 Jon Trickett: It is not for the NAO or PAC to get involved in policy or ideology. If the government decides it wants to do something which is more expensive, for whatever reason, than other ways of doing it that is up to the government. However, we are entitled and in fact should express an opinion as to the additional cost that policy incurs. That is our role and we ought not to duck it.
Sir John Bourn: I will say that I am quite happy to come back to the Committee with a supplementary report which would have the list of schemes which had been funded directly by the NHS. I am happy to come back and put that information before the Committee.
Chairman: That would be very useful; before we consider our Report.4
Q76 Mr Bacon: I must say I have a limited amount of sympathy for the NAO's position, particularly relating to the public sector comparator, because this Committee has often criticised the public sector comparator. I suppose there is one sense in which you are damned if you do and you are damned if you do not, but it does seem to me that the answer to that is more information rather than less. I was slightly perplexed by one of Ms Leahy's answers. You described the financial modelling process as a standard, rather mechanical one. It did occur to me that if it is standard and rather mechanical, why is it that there is no in-house expertise and it has to be farmed out?
Ms Leahy: We do have some in-house expertise, but we did not have it available at the time to do that. The resources were tied up at that time when we needed them and Operis were available and they do the sort of analysis that we wanted day in day out. We have used them for that sort of analysis in the past and it seemed good value to us to go to them rather than use other resources which could have been used on higher priorities in the National Audit Office. We saw it as a very straightforward low key decision to do that.
Q77 Mr Bacon: This is obviously a financial committee and these are called finance trusts. Can you tell me where in the Report there are tables referring to millions of pounds spent?
Ms Leahy: We do have the information on the plans for spending under LIFT for the six case studies in particular which we looked at for the Report. We concluded that what mattered for value for money were having a competition, a competitive procurement, looking at the finance terms which we have in a table in here, the cost of the debt.
Q78 Mr Bacon: So you thought it was better to put in the cost of the debt. Actually you have put it in. I was just checking whether there was anything else I did not know about, that I missed, other than page 38 where there are some numbers. I had to dig around to find them, but they are in Appendix 2 on page 38. A capital sum is given for each of the various case studies. I personally would have preferred more of that sort of information, only in more detail, further up, but that is where I eventually found it. You put the point very succinctly earlier when you said that value for money is a mixture of the costs over the period, over the whole life costs, together with the benefits and the quality. I put that even more simply and it is essentially what this Committee spends its whole time looking at, namely, bangs for your buck. That is the real question. It is not whether the centre that Dr Kohli works in is or is not marvellous. I went to have a look at it the other day and it is marvellous and Dr Kohli himself told us what a pleasure it is to work there, how easy it is to attract staff, there are regeneration benefits, which I shall come onto if we have time, but it really is about bangs for the buck, how much you can squeeze out of the lemon. Dr Kohli, you have some experience of running other GP practices with GP partners in buildings which you yourselves owned before you came into the LIFT scheme. Is that right?
Dr Kohli: Yes.
Q79 Mr Bacon: Could you say how many partners, how big the building was?
Dr Kohli: In 1990 I was a partner in a practice called Market Street Health Group where we had five partners and we built on a brownfield site something very similar to a LIFT concept. In this Report it is called a third party development, but actually we called it cost rent. Cost rent is in my world the original LIFT project. It was a device where GPs were incentivised to build and own and develop high quality premises. They were then the owners.
Q80 Mr Bacon: So you took the risk yourselves.
Dr Kohli: You took the risk yourself, you borrowed the money yourself and the health authority, whichever that happened to be, would give you an annual rent based on your cost to build based on a basic base rate, usually 1% above base rate. You build for £1 million and you get it for 6% and you would be quite happy with that because you would get it for 20 years or 25 years at the end of which the building is yours. You are 100% responsible for all hard FM: repairs, maintenance, the whole caboodle. Relative to that, which could still happen because they have not banned cost rents, a scheme like this which for our building cost nearer 20% per annum- I do not know about others-does seems exceedingly expensive.
_____________________________________________________________________________