Future of the NHS

Jesse Norman Excerpts

Monday 9th May 2011 Commons Chamber

[Mr Lansley]

I agree with my hon. Friend that the shadow Health Secretary is a decent man, and at the turn of the year he quite decently expressed his support for the Bill’s principles and his understanding that it was consistent, coherent and comprehensive. It makes one wonder what happened to him in the interim. Did the trade unions—the paymasters of the Labour party—get to him and tell him that they did not like the idea that patients should be able to get the care they need or the idea that we should get resources into the front line rather than into the vested interests of the NHS?

What we are going to do is put patient care at the heart of our reforms. We are not going to let hospital productivity continue to decline as it did over the last decade. Under Labour, we saw a 15% decline in productivity, yet we heard nothing from the shadow Health Secretary about that. It is this Government who are taking action to improve hospital performance by changing the way hospitals are paid to reward excellence—for example, by not paying for unnecessary readmissions of patients who are discharged too soon.

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

Hereford hospital is labouring under a very expensive private finance initiative contract. Does my right hon. Friend not think it a tragedy that the last Government cast good sense and good economics away, forcing so many hospitals into PFI?

[Mr Lansley]

My hon. Friend makes an important point—that it was under the Labour Government that many of these projects were undertaken, and they are leaving an enormous bill in the NHS for future taxpayers and future NHS organisations to meet. A contract is a contract, as the right hon. Gentleman and the House will understand, and we inherited contracts from the Labour Government, many of which were very bad contracts, such as the ones on IT that we have had to renegotiate. Frankly, it is due to my right hon. and hon. Friends in the Treasury and ourselves at the Department of Health that people have been put into the Queen’s hospital in Romford to look at how we can resolve some of these PFI problems and reduce those costs. We need to increase productivity in the NHS and cut out much of the waste in it.

It is us who will usher a new era of transparency into the NHS, shedding light on those areas that the previous Administration sought to cover up. Before the election, how often were patients having to go into mixed-sex accommodation when the rules on single-sex accommodation were breached? We did not know, because when Labour Members were in government they would not tell us. Since we started publishing the data in December, the number of patients put into mixed-sex accommodation without justification has halved.

Health and Social Care Bill

Jesse Norman Excerpts

Monday 31st January 2011 Commons Chamber

[John Healey]

The hon. Gentleman has already heard some of my hon. Friends mention the analysis of Dr John Appleby, published in the British Medical Journal online last week. He took to task those who had made the sweeping assertion that somehow Britain’s health service lags behind those of the rest of Europe. It is an argument that the Prime Minister advances. It is an argument for change, he says, because we are still a long way from European standards of care.

Let me read something to the House. We have been told that

“if you have heart surgery in England, you now have a greater chance of survival than almost any other European country – over the last five years, death rates have halved and are now 25 per cent lower than the European average.”

Those are not my words, or even those of Dr John Appleby. They are the words of the Health Secretary, published on ConservativeHome last week.

The Prime Minister argues that this is somehow an evolution and not a revolution. The Bill, however, is more than three times as long as the legislation that set up the NHS in 1948. The NHS chief executive told the Select Committee on Health:

“The scale of change is enormous—beyond anything that anybody from the public or private sector has witnessed”.

The Health Secretary argues that the Bill is somehow an extension of Labour policies. That is wrong, and it disguises again the fundamental changes to the NHS in the Government’s plan. Make no mistake, Mr Deputy Speaker: this is a revolution, not an evolution.

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

I note that the right hon. Gentleman failed to answer the question about the rate of increase in the number of managers. When I last checked, the NHS had 1.3 million employees, of whom almost exactly half were administrators and half were on the front line. Is he really willing to defend such an extraordinary level of overstaffing in management?

[John Healey]

Oh dear, the hon. Gentleman really has to get a better briefing from his Whips than that.

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.