Hospital Car Parking Charges (Hereford)

Jesse Norman Excerpts

Monday 26th July 2010 Commons Chamber

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I am very grateful for the opportunity to bring before the House this important issue, which is of great local concern in Hereford, where a campaign led by Sarah Carr has resulted in a petition of more than 1,400 signatures against hospital car parking charges. It is important to emphasise that this issue is not about a “little local difficulty”. On the contrary, it shines a bright light on the huge cost and inflexibility of the private finance initiative and raises some profoundly important long-term public policy issues about the management and financing of the NHS. It is a case study of the foolishness and self-serving incompetence of the last Government.

These charges are expensive and unfair. They affect hospital patients and their families at a very vulnerable and difficult time in their lives. They particularly target frequent users, such as those visiting in-patients and those suffering from cancer, and they are socially regressive, falling relatively harder on the poor than the rich. Nationally, patients are estimated to pay more than £100 million a year in these charges.

But the problem of car parking charges does not end with Hereford hospital—quite the contrary. The trust would like nothing better than to reduce or scrap the charges for those affected, but it cannot because its hands are almost completely tied by the hospital’s PFI contract.

To see why, we need to step back a little. Hereford hospital was started in 1999 and was one of the earliest projects undertaken through the PFI. It was built, and is currently owned and managed under a 30-year contract, through Mercia Healthcare. Mercia is a special-purpose company that is 75%-owned by Semperian, a large PFI firm that is based in the City of London, and 25%-owned by the French industrial services giant, Sodexo. As well as being a shareholder, Sodexo acts as the contractor for car parking, among other things, which it in turn subcontracts out to CP Plus. Other non-clinical services are contracted out, including maintenance to WS Atkins.

The total cost of the project has been about £93 million. In return the hospital trust pays a unitary sum every year, currently about £15 million, which covers all costs—both capital and services. Governing all that is a huge legal contract that seeks to cover every eventuality that could arise between the two sides over its 30-year life. But there is little transparency in the contract as to how much different services cost or what margin is being charged on them. Instead, there is massive inflexibility.

This is how the contract works. A consultant who wants to put up a shelf in her office cannot do it herself or get the odd-job man in—after all, the trust does not own the hospital; instead, she has to use the in-house PFI contractor at unknown but doubtless significant expense. The contract allows up to 12 weeks for a quotation to be supplied and up to 12 more weeks for the work to be completed—six full months from when the original need arose. Even that is not necessarily the end of the matter. The contractor will also insist that some items be treated as capital items—as permanent additions to the infrastructure. and charged for in every subsequent year of the life of the contract.

A recent low point was reached with the installation of a new TV aerial in the consultants’ staff room at the hospital. A “changes” notice was raised and sent to the contractor, WS Atkins in that case. Twelve weeks later, it was costed at the princely sum of £819 plus VAT, or a grand total of £963—almost £1,000 for a TV aerial! That is the reality of public contracting in the UK today.

It is significant that later PFI contracts contained some financial safeguards for the NHS, which included automatic efficiency savings of 3% a year and the right for a hospital to put services out to public tender periodically. However, the Hereford contract contains neither of those safeguards; any efficiency savings go direct to the PFI consortium. Yet including savings of only 3% a year would reduce the cost of services by 60% in nominal terms over the life of the contract. That is a lot of lost medicines, lost hospital care and lost surgery.

The car park is managed not by Mercia or by its contractor, Sodexo, but by Sodexo’s subcontractor, CP Plus, in effect creating a treble mark-up on the deal. The hospital trust has little influence, knowledge of underlying costs or legal scope to negotiate changes to the contract. There are no automatic efficiency savings, and the contract cannot be re-tendered until 2029. The PFI consortium is thus sitting on a huge revenue stream, paid for by the taxpayer. My fear is that the contract is costing the taxpayer millions of pounds too much over its life.

Is it any surprise that the citizens of Herefordshire are paying so much for car parking, or that so little progress has been made to fix the problem, despite the trust’s best efforts? Is it any surprise that cost inflation in the NHS has been running at twice the national level?

Let us take stock. The issue of car parking charges is a matter of public concern. Every year, thousands of vulnerable people are affected by the charges in Herefordshire alone. We must have a solution.

It is well known that PFI contractors have done very well over the years from the huge wave of spending that has taken place in the NHS. I therefore ask Sodexo and Semperian to sit down again with the hospital trust, open up the books, sharpen their pencils, pass on some efficiencies and work with the trust to craft a new agreement. For myself, I shall not let the matter rest until they do.

However, the deeper issue, here as elsewhere, lies in the impact of the PFI itself. It is almost as though these contracts were deliberately designed to impede public transparency and public accountability. The point is not to blame those who originally negotiated the Hereford contract; they were rightly delighted that the new hospital was being built, in a county traditionally starved of public investment. It was one of the earliest deals of its kind, and as with any new market it took time to develop the knowledge and safeguards of the public interest that existed in later deals.

But if we look more broadly, we see some staggering ironies. The PFI was used to protect the last Government’s much-vaunted fiscal rules, only for the same rules to be spectacularly smashed anyway, as their spending boom gave us the longest and deepest recession on record. Secondly, the early PFI consortiums were actively encouraged by the Government to take on service provision so that their debt could be put off balance sheet. The result has arguably been to impose hundreds of millions of pounds of unnecessary costs on the NHS, while the Office for National Statistics has started to look at bringing the same debt on to the national balance sheet anyway. You could not make it up, Mr Speaker. Thirdly, the PFI has put car parking and other services beyond the scope of public accountability, while the structure of the contracts prevents hospital trusts from having the very information they need to renegotiate the contracts themselves.

This cautionary tale raises a vital wider question. At a time of fiscal crisis, should PFI projects be exempt from contributing to the public purse? I would argue that they should not be exempt. They should contribute to our national economic recovery like everybody else.

There are some £210 billion-worth of outstanding PFI capital assets in this country at the moment. A McKinsey study last year suggested that for the NHS alone, a reduction in interest charges of just two or three one hundredths of 1% could save £200 million. Anyone who thinks two or three hundredths of 1% is a lot should bear in mind that since July 2007, the base rate has fallen a full 5.25%.

“Are these not commercial contracts?”, it might be asked. Of course they are, and I am not for one moment suggesting that those contracts should be torn up. But the Government do not lack influence in this area. They have many points of contact with the different consortiums. For example, Semperian alone has stakes in 106 different PFI or public-private partnership projects, while Sodexo has stakes in 11 of them.

Moreover, many of the investors in these organisations are themselves public authorities. The largest investor in Semperian, with an equity stake of more than 25%, is Transport for London. It and other public bodies may themselves wish to support fairer treatment of PFI hospitals, rather than make huge sums at a time of national austerity.

Finally, some PFI providers are looking to expand abroad in search of future growth. They will not wish to be faced with criticism at home about the high cost of their services, while they seek new markets overseas. So I would call on the Government to use all these levers to encourage PFI providers to rebate some of their gains to the taxpayer. There is a direct precedent for this in the voluntary code that was introduced a few years to encourage PFI providers to share refinancing windfalls with the taxpayer.

I will close on a more positive note. The use of assets in many PFI hospitals remains far below international best practice. But over the longer term, there is clear scope to open up current deals, to relax some of the restrictions, to make better use of hospital assets and to remit more value to the public purse. The contractors will get what they are owed, but the taxpayer could benefit still more. That, I suggest, should be the thrust of Government policy in this area, and I greatly look forward to hearing what the Minister has to say on this issue. I would, of course, be happy to work with him to win a fairer deal for the taxpayers of Herefordshire and elsewhere if the need arises.