UNISON Scotland's response to the Consultation on the use of Joint Ventures to deliver primary care/joint premises.

May 2004

Executive Summary

UNISON Scotland welcomes the opportunity to respond to the consultation on the use of joint ventures to deliver primary care/joint premises.

UNISON Scotland is opposed to private business taking over the ownership, financing and management of any public sector infrastructure and services and tying the public sector into exclusive long-term contracts with private sector companies.

UNISON Scotland has concerns regarding the requirement of public sector partners i.e. to hold shares and to become members of boards of directors of profit making companies as required under this new venture. We believe this will cause problems with accountability and conflicts of interest

UNISON Scotland has concerns about the majority shareholding of the private sector in LIFTCOS as it raises questions on control as it brings new and different commercial aspects to public services.

UNISON Scotland is concerned that there is no indication as to how the Joint Ventures will be evaluated and we believe it will be necessary to fully monitor and review all contractual and governance arrangements in the interests of transparency and accountability

UNISON Scotland believes that there should be a wide-ranging consultation regarding Joint Ventures and the use of LIFT involving all sectors of the community particularly older people, children, ethnic minority ethnic groups and disabled people.

UNISON Scotland has concerns that the national joint venture companies involving Partnership UK are supposed to give independent advice to local LIFT projects. It is questionable how independent this advice would be given that these companies have a stake in the local LIFT projects.

UNISON Scotland has concerns regarding the LIFT scheme in terms of affordability and value for money. Participants in the scheme will be required t o commit themselves to long term contacts and put extensive resources into the setting up of the scheme and into leasing and maintenance but will not own the building at the end of the contract.

UNISON Scotland is concerned at the job losses, which will be sustained through the use of Joint Ventures. The premises owned by the LIFTCOS will be maintained and serviced by them. There is also concern that, as in the past with other PFI schemes that costs will be cut and profits increased by worsening staff pay and terms of employment and career opportunities for new staff, so creating a two tier workforce.

UNISON Scotland is concerned that there will be new issues of capacity and risk with the LIFT schemes and it is unclear how much risk will actually be transferred to the private sector. As with any other private company, LIFTCOS could fail and so there will be risks in the public sector contracting with LIFTCOS and also in being shareholders.

UNISON Scotland is concerned that the cost of using PFI has tended to escalate during contract negotiations. The risk of such cost increases in LIFT will be borne by the Health Boards and other public sector partners. Therefore a LIFT agreement is likely to make significant claims on the revenue budget of the organisation for many years with a consequence to other services.

Introduction

UNISON is Scotland's largest trade union representing 150,000 members working in the public sector. We are the largest trade union in local government and the NHS in Scotland. UNISON welcomes the opportunity to respond to the consultation on the use of Joint Ventures to deliver primary care/joint premises as it covers issues of great concern to our members not only in their professional lives but as citizens too.

This paper constitutes UNISON Scotland's response to the consultation on the use of Joint Ventures to deliver primary care/joint premises.

Responses

UNISON Scotland is opposed to private businesses taking over the ownership, financing and management of any public sector infrastructure and services and tying the public sector into exclusive long term contracts with private sector companies.

UNISON Scotland believes that there are unacceptably high financial, employment and democratic costs to using this method of financing Scotland's public services and is opposed to it, believing that in many such schemes, the ‘value for money' criteria is not met and that such schemes in reality cost more that the alternatives.

UNISON Scotland also believes that such schemes are not affordable and result in substantial cuts in services and in addition have little transparency or user involvement during the planning stages.

UNISON Scotland believes that such schemes involving the private sector are under misguided pressure to pursue off-balance sheet schemes and this has encouraged the unnecessary transfer of staff.

Scope and definition of proposed powers

UNISON Scotland has concerns regarding the requirement of public sector partners to hold shares and to become members of boards of directors of profit-making companies as required under the LIFT scheme which is proposed for Joint Ventures. The setting up of such companies is promoted by the Government as an opportunity for the public sector to have greater influence and oversight of how its money is spent than is the case with traditional PFI schemes. However the public sector will have only a minority of shares in the LIFTCOS (initially 20 per cent at the local level, which can be sold) and it is questionable whether or for how long their activities will remain part of a wider public sector strategy for premises development.

UNISON Scotland also believes that the creation of the LIFT scheme means that, for the first time, NHS and other public bodies will directly hold shares and directorships in companies that are operating for a profit. This will bring a new and different commercial aspect to public services and a new set of responsibilities and liabilities and potential conflicts of interest for executive and non-executive directors, councillors and other public sector board or governing body members. It may be a ‘convincing' model from the private companies concerned but not necessarily in the public interest.

UNISON Scotland has concerns about the majority shareholding of the private sector in LIFTCOS. It raises questions of accountability and control and the involvement of public sector representatives, both as purchasers of LIFTCO services with a duty to keep costs down, and also as members of the LIFCO boards, with a duty to maximise profits for shareholders may give rise to conflicts of interests.

There is no indication in the paper as to how Joint Ventures will be evaluated. It is essential that such schemes have a realistic public sector comparator with a genuine level playing field as recommended by Audit Scotland for PFI schemes.

Regulation

UNISON Scotland believes that during the life of a local LIFTCO it will be necessary to fully monitor and review contractual and governance arrangements. It will be important that any LIFT scheme remains transparent and accountable in operation and continues to provide value for money. Governance arrangements will need to be clear and because there is no precedent for the governance of companies such as LIFTCOS, it will need to be monitored for any problems of accountability and conflicts of interest.

UNISON Scotland believes that the exclusivity clauses in the LIFTCO contracts mean that the local LIFTCO will have exclusive right to provide new facilities and/or services commissioned by the participants as part of the overall premises strategy. Public sector partners will need to ensure that only those services and facilities that are genuinely part of the Strategic Services Development Plan are included in contracts with LIFTCO.

UNISON Scotland believes that making public sector infrastructure subject to commercial business considerations will open up LIFTCOS and their contracts to all sorts of trade agreements. This will include the General Agreement on Trade in Services (GATS) and that will require extensive monitoring - more than is currently required in relation to premises' management in the public sector.

UNISON Scotland also believes that the following issues will have to given full consideration as regards the governance and monitoring of LIFTCOS:

1. What is the liability of LIFTCO board members, including any public sector partner board members?
2. What mechanisms will there be to ensure that public sector board members are accountable to the bodies they represent?
3. How much control will the original board composition have?
4. How vulnerable will a LIFTCO be to a takeover?
5. What mechanisms are in place to ensure compliance with the original contract with the LIFTCO and the termination of the contract if it is breached?
6. How will the public sector ensure that all and only those new facilities and/or services covered by the exclusivity agreement are provided by the LIFTCO
7. Do the organisations have the capacity to monitor the implication of and compliance of the LIFTCO with relevant trade agreements and other aspects of commercial practice?

Engaging Stakeholders

UNISON Scotland believes that setting up a local LIFT scheme could take up to two years. This should allow time for members of public sector bodies and trade union representatives to have their views heard and for them to ask questions about the LIFT process and its outcomes and to assess, at each stage of the setting up process, whether the LIFT route is in the best interests of the communities and staff that they represent.

UNISON Scotland believes that there should be a proper strategy for public and service user consultation during the development of a Strategic Services Development plan, the assessment criteria for bids, the detailed design stage and throughout the life of the LIFTCO when new premises and services are being introduced.

UNISON Scotland believes that premises designed and serviced by LIFTCOS are intended to have sufficient flexibility and adaptability to cater for changes in health and social care needs, new technology and new forms of service delivery. Therefore the consultation process should be designed so that local people, service users and staff have an opportunity to consider future needs in imaginative ways.

UNISON Scotland believes that the consultation takes into consideration the needs and wishes of different groups of people such as the older people, children, minority ethnic groups and disabled people. These consultation techniques must be suitable to meet the communications of all these different groups.

UNISON Scotland has concerns that the national joint venture companies involving Partnerships UK are supposed to give independent advice to local LIFT projects. UNISON believes that it is questionable how independent this advice will be, given that these companies will have a stake in the local LIFT projects and will hope to make a profit from them. It would obviously not be appropriate to use these advisers to consider alternatives so LIFT, so assurances should be sought out on financing options by genuinely independent sources. One of the companies the Scottish Executive has already listed as one of the Joint Venture consultees is Ballast Wiltshier. Earlier this year Ballast went into liquidation leaving a trail of devastation in its wake.

The Local Improvement Finance Trusts

UNISON Scotland believes that LIFT is intended for smaller scale projects than PFI schemes but it has all the disadvantages of PFI and as a vehicle for borrowing LIFT is wholly untested and untried in the NHS arena.

UNISON Scotland believes that by participating in LIFT schemes, the public sector partners will be required to enter into long term legal obligations and will be putting extensive resources both into the initial setting up of LIFT schemes and into leasing and maintenance contracts with the new LIFTCO companies. Despite all this financial outlay, and unlike the PFI contracts, the public sector will not take ownership of the building at the end of the contract. It will remain the property of the local LIFTCO. This raises questions of affordability and value for money.

UNISON Scotland believes that the premises owned by local LIFTCOS will also be maintained and serviced by them. This means that some staff who are currently employed by the NHS, by GPs or by local authorities and possibly schools and other public sector bodies may be transferred to LIFTCO. In addition some new jobs, instead of being public sector posts, as they might have been in the past, will become part of the private sector.

UNISON SCOTLAND is concerned that, as in the past with other PFI and private sector providers of public services, that costs will be cut and profits increased by worsening staff pay, terms of employment and career opportunities for new staff, so creating a two tier workforce. It is unclear from the consultation paper if this scheme is to be treated as a PPP scheme and therefore covered by the Scottish Executive/STUC PPP staffing protocol.

UNISON Scotland is concerned that in the past, local NHS primary care bodies have not had to participate in and manage such complex legal agreements or such large capital projects. There will be new issues of capacity and risk in being involved in local LIFT schemes. It is unclear how much risk will actually be transferred to the private sector. It could be that under the terms laid down for the setting up of LIFTCOS, Health Boards may have to take over leases, if the GP's lease expires without a successor being immediately available. So there may be risks for public sector bodies in contracting with LIFTCOS and there may also be risks in being shareholders, since LIFTCOS, like any other private company, can fail. With all PPP schemes the real risk falls back on the public sector who have to ensure the delivery of the essential public service.

UNISON Scotland is concerned that the cost of using the Private Finance Initiative for hospital and school buildings has tended to escalate during contract negotiations. The risk of such costs increases in LIFT will be borne by Health Boards (and other public sector partners.) A LIFT agreement is likely to make significant claims on the revenue budget of the organisation for many years, with consequences for other services.

Alternatives to LIFT

UNISON Scotland believes that there are alternatives to Joint Ventures and LIFT and that these should be adopted. These involve the use of conventional borrowing by PSO's . This option allows borrowing at lower interest rates and without the need to finance private profit. Where projects involve local authorities then prudential borrowing powers can be considered. There is also a need to consider mechanisms for extending these powers to the NHS.