Q51 Austin Mitchell: I'm taking that answer as a no in any case, but let's move on from there, because the whole Health Service, the whole Government is now under pressure to make efficiency savings. People are being laid off to cut costs, and yet they've no ability to cut the costs of these contracts. I see that five of the six trusts with deficits have PFI contracts, which have to be fulfilled. You're not providing them with much help to screw those costs and get more value for money out of the thing; therefore, hospital porters, surgeons and doctors are going to be laid off to economise and to give them the efficiency savings, because you can't get the money out of the PFI contract which has caused the problem in the first place.
Peter Coates: To go back again, the majority of the flexible costs within this contract relate to the provision of services.
Q52 Austin Mitchell: I've asked you to say how you're going to save money on these contracts.
Peter Coates: Well, all of the trusts in these services either benchmark or market-test those services against the market on a regular five-yearly basis. That's how they will get value through to their patients and their staff.
Q53 Mr Bacon: Except for maintenance.
Peter Coates: Except for maintenance, and we talked about-
Q54 Mr Bacon: One of the biggest underlying arguments for the PFI philosophy-correct me if I'm wrong-was that, in 30 years' time, you'd have an asset that had been beautifully maintained and was in the same condition it was on the day you entered into the contract.
Austin Mitchell: And these are new buildings.
Q55 Mr Bacon: But if you can't actually, in an environment of very strong cost pressures, revisit that, because that's set in stone, then you have to look elsewhere, don't you? Is that right?
Peter Coates: What I don't know is-
Q56 Mr Bacon: Is that right?
Peter Coates: It is right that the contracts prevent you undoing that deal, yes.
Q57 Mr Bacon: So, it's right that you have to look elsewhere for your cost savings. Peter Coates: That is right too.
Q58 Chair: And from what you said earlier, are you looking as to whether there are any opportunities for you to revisit those clauses on maintenance, or are you telling us there are no opportunities?
Peter Coates: We don't know yet, because we haven't had the vigorous debates with the private sector generally, but I did say earlier that the argument will run, "I've lost £100 million on building this hospital and now, because I've made £4 million on maintaining it, you want that back". They're difficult tensions as well.
Q59 Ian Swales: Just before we leave this question of value, I know that, when PFI schemes first started, once a few had been completed, it wasn't very long before a company set up to trade in PFI deals. The chief executive was paid £750,000 a year. I forget the name of the company now, but clearly, trading in these deals is very active. We've just heard about the consolidation. One of the tests of the value of these deals is, obviously, the price at which they are then traded in the market, and I know, from working in a big construction company, that they were making far more money trading the deals later than they were from the actual construction. How much information do you have about the price at which these consolidators are actually building their portfolios, and what does that tell you about the value of the original PFI arrangement?
Peter Coates: Well, to answer your two questions, we do not track the value, because it's quite difficult to do so. And the second is, "Is the thing worth more after you've built it?" Well, it is, because the risks are all during construction, and once those risks have passed, then clearly there's a much better view about future cash flows and the valuation is much more easily determined. But we don't track, no.
Q60 Mr Bacon: Why is it difficult to do so? All you have to do is to write into the contract at the beginning that "every time this changes hands, we"-the payer of the annual unitary charge-"must be informed of the value at which it changed hands".
Peter Coates: I can provide a note for you, but I think the contracts do say that we have to be asked, but we won't refuse it without good cause.