Q41 Matthew Hancock: 1% every year.
Peter Coates: No, 1% in total.
Q42 Chair: In one case.
Peter Coates: In one case.
Q43 Matthew Hancock: That's the only one you can remember.
Peter Coates: The only one I can remember, yes. Answering your question honestly, "Have you done it?", yes we have, but when you get to that difference, its margin-of-error points.
Q44 James Wharton: Mr Coates, I'm a little concerned. There are two issues I want to touch on, but one is just responding to the question Mr Hancock's been asking you: this idea that the 120 or so-however many hospitals it is in the last 10 years-may not have been built because of the ebbs and flows of capital availability within government. I've always believed that the reason that we elect governments is so that they can make decisions and, quite rightly, as Mr Hancock pointed out, the reason that capital may be available at one time and not an another is that the circumstances may have changed, or it allows a government-which may be a new government; it may be the same one again-to respond to changing circumstances. Are you really saying that the advantage of PFI is that it allows the Secretary of State to tie the hands of his or her successors for a prolonged fixed-contract period in terms of the costs of whatever it is-hospitals in this case-they might want to buy?
Chair: James, I'm going to interfere on that because I think that almost becomes a political question. I'm sure others will come in. There was a view-and now it's an irrelevant view, because PFI is on balance sheet-that, if you wanted to bring forward the investment into infrastructure the route to do it off balance sheet was through PFI; that was a view and these guys had to do it. It was a political view; I don't think it was an administrative view. What I think is interesting from what Peter Coates has said is that, in his view, which I've never heard before, actually the cost-benefit of that-it didn't cost us more; i.e. the benefit came forward but the cost was not greater. Now, I think it's unfair to say, "Was there a political view?" I'm telling you: yes, there was, right? That was what drove it. So, let's try to stick to questions about the value on it.
Q45 James Wharton: Not on an entirely separate point, but something that I want to understand is, Sir Bob, you mentioned-and we hear this a lot at this committee-that, since the Report, the comparator has been strengthened in respect of assessing PFI against any other methods of delivering whatever it might be: in this case, housing. Could you let us know: in what ways has it been strengthened and how significantly better is it now than it was before you had this Report and this information?
Sir Bob Kerslake: I think the biggest change we made was the introduction of what we call Financial Proformas that we required to be completed for each of the key schemes, and that gave us a more systematic and comparable set of information across the different schemes that we were working on. That was the biggest single thing that we did.
Q46 James Wharton: Do you anticipate that that will make a significant difference to outcomes?
Sir Bob Kerslake: I think it's made a significant difference to the quality of the information we have when we consider schemes, and it's also enabled us, I think, to be much more robust about potential cost increases during procurement. It's worth saying that, since 1996, other than Brent, we haven't seen an increase in the credits for a housing scheme during the procurement phase, and I think, in good part, that's linked to us having robust evidence to push back on situations where the costs might increase.
Q47 James Wharton: Okay. It sounds quite positive that this change has come about and is going to allow you to make better comparisons going forward; is that the only major area in which you think there have been deficiencies looking back over when that comparison has been made? Are you comfortable with the quality of the answers that you've got when running the comparisons previously and decisions were being made based on that information?
Sir Bob Kerslake: I think there was evidence there. What I think the NAO Report quite rightly said was that it was patchy in some instances and it needed to be more consistent and consistently strong, and I think that's what we've done. I don't think it says that there was a set of bad decisions made before; I think it says that we're making decisions now on better evidence than we had then.
Q48 Austin Mitchell: I'll climb under your cloak of value for money. I'm worried about the balance of power, actually. You've got these big organisations- and I see that Innisfree has 24 hospitals, and then there's Semperian, wherever these names come from. Now, this could be compared to the kind of rolling-up of debts and CDOs which were securitised, which led to the sub-prime crisis in the States, but it does give these big organisations great power and great weight, because they're facing little trusts, medium-sized trusts that don't have the management expertise, don't have the experience, don't have the staff and the time to pursue performance and value for money. Now, it comes to a question, therefore, of what help you can give them from the Department of Health, and I'm concerned to see that page 9, paragraph 19 says that these big bodies will "seek to maximise their profit margins", which is a normal capitalist function, and we've seen examples where this is at the expense of the trust. It's a concern, therefore, that the Department's support for them is limited. Do you have the mechanisms for monitoring the costs and the performance and for driving value for money into these contracts at the centre in the Department, where you've got the weight to do it?
Peter Coates: Essentially, the trusts are running contracts face-to-face with the SPV. The company that runs that hospital runs the services for them. These are tendering for services in which the trust should know outcomes, quality and standards. These are things like catering, domestics and portering.
Q49 Austin Mitchell: Well, the trusts don't seem all that satisfied overall, particularly with the costs of maintenance.
Peter Coates: The maintenance is an exception, because the maintenance is not tendered on a regular basis, and it is the area that trusts seem to be most dissatisfied with, I accept. But, by and large, most of the work that interfaces between these in terms of market value is through services the trust is familiar with.
Q50 Austin Mitchell: I don't think that's a satisfactory answer. The question was: do you at the centre have the expertise, the knowledge and the ability to assess what's been screwed out of the public sector by these big bodies?
Peter Coates: I have four people working on PFI full-time.
Austin Mitchell: Four?
Peter Coates: Four. When PFI tenders were being let, the team was about 20 to 25 in strength, and I have to allocate resources in a bidding process with my peers according to the pressures on me. The pressures, at least for me, were, "When are the big risks and rewards there?" that's during the tendering process, and "When do they subside?" and that's during the operational phase. By and large, we have to say that trusts must operate these hospitals. They are some 10,000 people with very skilled individuals managing them and, at some point, we have to accept that they have to own the outcomes of the contracts they're letting.
Stephen Barclay: To support you, I'd just reference page 8, this line: "The Private Finance Unit's ability to further support Trusts to manage their contracts is limited ... by a lack of performance and cost data", and it goes on to say, "The Department does not use its leverage over the market from having 76 contracts in force". I think that's where your-