Lord Warner
To ask Her Majesty’s Government what assessment they have made of the performance of NHS Property Services Ltd in disposing of surplus properties and operating within their working capital.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, NHS Property Services is on target to dispose of 97 properties by 31 March 2014 and a further 100 properties by 31 March 2015. The department has provided the company with a £350 million flexible working capital loan facility, of which £271 million had been drawn down as at 27 January 2014. This working capital support is in line with the department’s expectations for a start-up company of this size and complexity.
Lord Warner (Lab)
I thank the Minister for his Answer, but what action has been taken to improve the performance of this company in controlling its costs? What action has been taken to reduce its running costs, given the large number of staff that it inherited, and what action has been taken to improve the professional competence of those staff and to collect bad debts, which have been a rising problem for this organisation?
Earl Howe
My Lords, on administration costs, the company is already reviewing the way in which its strategic asset management and facilities management functions are structured. It is probably inevitable that the consolidation of 161 PCT and strategic health authority estates into one will throw up duplication, overlap and operational policies that conflict. These all need to be rationalised and a commercial ethos introduced. It is vital that the skills are imported into the organisation to match that challenge.
Lord Mawson (CB)
My Lords, for the past six years, we in St Paul’s Way in Tower Hamlets have been pursuing the Government’s policy of integration in health services, bringing together a school, housing, health and community services centre on one street. I was asked to lead this project following a murder and considerable racial violence on this housing estate. The overall transformation project has been very successful, and I must declare an interest. However, the primary care premises elements have stalled and we are going backwards in terms of dental outreach facility. Can the Minister explain how NHS England engages with NHS Property Services, the CCG, local GPs and local partners to deliver in an effective and timely manner the kind of innovative and integrated premises we all agree are essential?
Earl Howe
My Lords, I pay tribute to the work that the noble Lord does. However, it is important to understand that the decision as to whether a property in the NHS Property Services portfolio is surplus to requirements and should therefore be sold resides with the commissioners; that is, NHS England and clinical commissioning groups. It is up to the commissioners how they wish to utilise the estate.
Lord Brabazon of Tara (Con)
Is my noble friend aware of the situation of Putney Hospital, which closed about 15 years ago and has only recently been sold to Wandsworth Borough Council, but is still undeveloped?
Lord Hunt of Kings Heath (Lab)
My Lords, I refer noble Lords to my interests in the register; I should have done that yesterday on another health Question, for which I apologise to the House. Can the Minister confirm that the chairman of this organisation resigned early, that capital money was raided to cover a revenue shortfall and that, only months after the organisation formally started, an investigation has been mounted by the National Audit Office? Given that the shares in this company are owned by Ministers, will Ministers take responsibility and can the noble Earl confirm that this was forecast in the NHS risk register, which the Government have not yet published?
Earl Howe
My Lords, the noble Lord has painted rather a black picture of the company, which we believe has got off to an extremely good start, contrary to his impression. The company’s former chair asked to step down six months earlier than planned because the company had completed the transition phase early, and it was agreed that a chair with a different skill set was needed to oversee the rationalisation of the company.
As regards the company’s cash needs, we made £350 million available to the company as a working capital loan. That was planned some six months ago and was needed in large part due to the slow payment of invoices by the company’s customers, many of whom were themselves new organisations set up as part of the reforms, so it is not altogether surprising that cash flow initially was slow, but the situation is improving.
Lord Colwyn (Con)
My Lords, can my noble friend tell us what efficiencies and successes NHS Property Services has actually made?
Earl Howe
My Lords, it has been a good start for the company. It has generated £22 million from sales of surplus assets and savings of £2 million a year on the running costs of those disposed properties. The company is also harnessing economies of scale—for example, savings to date of £1.2 million by standardising the procurement of electricity across the whole estate. The company is now exploring how to make savings across other utilities and services, such as legal services.
Lord Turnberg (Lab)
My Lords, following the response to my noble friend Lord Hunt’s question, can the noble Earl tell us why the National Audit Office has decided to conduct an investigation so soon after the establishment of this organisation?
Earl Howe
My Lords, the National Audit Office is indeed looking at the company—only to assure us and itself that the company is properly organised and structured. We welcome that, as does the company. There was no sinister purpose or concern underlying that process; it is perfectly normal and natural.
Baroness Manzoor (LD)
My Lords, can the Minister confirm best value for money on all properties sold and that there has been proper consultation with local organisations on all NHS estates?
Earl Howe
My Lords, I can assure my noble friend of that. The company ensures best value by marketing through an arm’s-length open market process, which ensures that the market value is achieved in a sale. Where necessary, the sale price is supported by a district valuer or other third-party independent valuation.
Baroness O'Cathain (Con)
My Lords, I ask my noble friend: when people are appointing chairmen to such organisations, could they look at their skill sets in advance rather than getting rid of them because of their lack of skill sets?
Earl Howe
My Lords, it is important to understand that the chairman who has stepped down had a very good set of skill sets, but it is not the skill set that we now need to take the company forward. The task at the beginning was to consolidate a very complex portfolio of properties, and that was done very successfully. The task now is different: it is to manage those properties effectively and to get maximum value for the taxpayer for the properties that are sold.