Q111 Chris Heaton-Harris: On page 7, in paragraph 9 it says "The Department's analysis of new build projects shows that the capital cost of PFI projects is similar to housing association developments. This analysis, however, does not take account of all project costs, for example finance costs." I'm just wondering whether you are actually comparing like with like.
Sir Bob Kerslake: I think the short answer to that is that we've compared what we can compare, which is the base construction costs. That particular comparison was with housing association construction. Where we can compare, such as with the underlying construction costs, clearly you're using very different financing mechanisms and we're not claiming that we can say the totality of the costings are the same. What we've done is look at the bit we can benchmark, which is the construction cost.
Q112 Matthew Hancock: Most of the early data was based on refurb, wasn't it, rather than construction?
Sir Bob Kerslake: Yes it was.
Q113 Matthew Hancock: So how do you use that now to benchmark construction costs?
Sir Bob Kerslake: What we have is refurb compared with other options on refurb, which is the Decent Homes programme and so on. We do have comparisons between alternative funding mechanisms, as well as information over time. You're quite right to say that the earlier rounds were principally refurb, but there was some new build there as well in the non-HRA schemes.
Q114 Stephen Barclay: The NAO makes a number of recommendations in its Report. Mr Coates, you mentioned having just four members of staff. One of its recommendations is to have a formal PFI support club.
Peter Coates: Yes.
Q115 Stephen Barclay: When do you expect to have that club in place and how many staff will it involve?
Peter Coates: I'm still trying to work out in the great scheme of things where I sit in the new Department of Health but it's becoming clear to me that my work will not form part of the Department. We therefore hadn't given consideration to the PFI club until very recently.
Q116 Chair: Does that mean you're not going to do any more PFIs, or it will be down to the Trust to decide whether to do one?
Peter Coates: It will be done in a different way and I don't know the answer about what that different way is.
Stephen Barclay: This Report came out in June, so there's been time.
Q117 Chair: This is quite important. Just sitting back, when I read these two Reports I thought "God, we've got a centrally controlled Department of Health really on top of its PFIs, although there are some question marks over it, and we've got a completely decentralised DCLG, hasn't got a clue what's happening out there and the local authorities are doing it." Now, what you're telling us is we've got a very good unit in the DCLG which would give us all the data and the comparators, and we won't have a clue what's happening in health capital investment because you're not going to be there.
Peter Coates: I think that's slightly unfair. To answer the question about the PFI club; because of the way things are developing now it's clear to me that this is a very useful and very helpful recommendation and I have told the NAO that we will be progressing this. We have already put together a proposition to trusts that will say essentially that the larger the scheme you have, the more you'd have to pay to join this club, at around £5,000 per average trust. If we have about 100 trusts with PFI schemes, that generates an income of around £500,000. Where I think we're going to go on this is that we will have to find some way of developing a contract in which people can bid to provide that support, so that if circumstances prevail and we are no longer here to support trusts the way we do, the trusts own a society and a club that can provide the advice and support that we currently do. I'm quite a big fan of this idea, because, going to this idea about benchmarking and data, if you start paying someone enough money to make it worthwhile and the Trust own it, I think they will start to respond to it a bit more.
Q118 Stephen Barclay: Perhaps you could give us a note once you know whether that's going to go ahead. I simply observe that it's five months since the recommendation was made public and presumably you saw the Report prior to publication. As a fan of it, there doesn't seem a huge amount of urgency. Could I look to one of the other recommendations? It says that the information that you currently get on the ERIC system is not fit for purpose. When do you expect that data quality to have improved so that it is fit for purpose?
Peter Coates: The ERIC database has been going on for some years and is run by my colleagues in the estates department. It's not a database that is obligatory to complete, so I think the answer in relation to "it's not very good data" is that it's not complete. Any data that's not complete is unreliable.
Q119 Stephen Barclay: Can I rephrase it then? I'm a new member of this Committee but I think pretty much every hearing that we have identifies that data quality within Whitehall is a systemic problem. That comes up in numerous Reports, where data quality is an issue. Could you perhaps give us a note setting out what is the programme to improve data quality and perhaps today just give us an indication as to what is happening and when you think data quality will have improved?
Peter Coates: I will gladly provide you with a note about where we're going on it but there are no plans that I'm aware of to oblige trusts to provide data as regards the information that's currently in ERIC.
Q120 Stephen Barclay: I think that ties in to the Chair's comment around the foundation trusts as well and how the data quality and relationship there plays. Perhaps I can go with the third recommendation of the Report which is about using contractors' reputation risk as a lever. That was behind my earlier question about what is happening in terms of the consolidation on the private sector side. Can I just point that specifically to the very early PFI contracts? So, for example, if one looks at the Hereford Hospital that Mr Hancock cited earlier, that was signed at a time before the 3% efficiency discount was put in as a standard clause of contract. What work is going on to look at the very early PFI projects, and to use, if I may say, the soft power of the Department to leverage some changes within those contracts?
Peter Coates: There is nothing specifically going on in relation to Hereford or any other of the schemes. I go back to the point I made earlier that all of the hotel services within the hospitals are regularly market tested and that generates efficiency savings to the Trust. We are where we are on the building maintenance: we have a 30-year contract that doesn't allow us to change the terms of it. The remaining costs within the trust are basically the building costs and the debt set in the building contract.