Tony Blair has often said that he wants his legacy to be public sector reform. Key to this is the building of new schools and hospitals. But is Labour succeeding?
What they promised last time around:
650 schools rebuilt or renovated by 2004
No – 430 have been completed on time, the rest are part of the ‘PFI pipeline’
Labour’s spending plans for education have been the key domestic focus of this government since it was elected in 1997. In the first term it was concerned with “soft” areas, such as decreasing the number of pupils in a class. Having inherited a school building budget of less than £700m, it only increased this to £956m by 2000/01.
In the second term the focus shifted, as it promised to rebuild 650 schools. To achieve this, it more than doubled the Department for Education and Skills’ capital spend to £2.2bn in 2001/02. By next year it will have broken the £5bn barrier.
Money isn’t everything, though, and the government fell well short of redeveloping the 650 schools within its self-imposed three-year deadline. Instead, it fudged the results: 430 were completed, and the remainder were in the “PFI pipeline”. The government line was that redevelopment had started on 650 schools.
In truth, it has been difficult to judge exactly how much work the government has done. The DfES does not keep tabs on what local education authorities do with the capital spending they are allocated. Therefore, although the department believes that repairs to 7000 schools have been made in the past year, it cannot verify this.
The need for these repairs was established by a survey of LEAs in May 2003. It suggested that the backlog of needed repairs stood at £7bn in 2001, but had escalated to £8bn three years later. Allan Wilen, economics director at the Construction Products Association, says this increase could have simply been because Labour had raised the stakes. “Perhaps in the 2001 survey, expectations were less,” he says.
Estimated backlog of school building repairs in 2001
Estimated backlog of school building repairs in 2004
Wilen also argues that despite some of the problems, the flow of work in education “has been good and strong”. And it will get better and stronger, with the £2.2bn-a-year secondary school programme, Building Schools for the Future, due to formally start this year. Some “quick fix” money has already been made available to set up pilot schemes.
The one fear is that this programme will take a good 12 months to get into full swing. Andy Sturgess, main board director at contractor Galliford Try, warns that, as the latest wave of PFI work is coming to an end, there could be a lull in construction activity between now and the BSF launch: “The last PFI schemes have already reached advanced phases in the tender process. I’m wondering if there is going to be enough throughput for a little while – I’m hoping that there isn’t going to be a lag in activity.”
There have already been some problems. Whitehall mandarins moan that they needed at least 12 months more than the two years the then schools minister David Miliband gave them to set the scheme up. The hectic timescale has led to some confusion, with contractors complaining that they don’t understand how the system works. Local authorities have exacerbated the difficulties, asking for 80% of the work to be done through the PFI. There were simply not enough credits available for this, and it has been a tortuous process to get authorities to scale down their ambitions to a more manageable 50%. Added to this, there is now confusion over how the new local education partnerships system – which splits the financing three ways between local authority, private sector and Partnerships for Schools – will work.
Another major problem was the leadership of Partnerships for Schools, the quango that now runs BSF. The body’s original chief executive, ex-Amey man Robert Osborne, quit last February. Officially he felt that he had completed his job setting the body up. Some close to him suggest that it was in fact because he found the department’s involvement – DfES holds a 50% stake in the quango – “stifling”.
Delays to the announcement of pilot schemes were inevitable when at least two candidates to succeed him pulled out at the last minute. In the end, the acting chief executive, Robert Osborne, stayed on and led the drive to get local authorities to lower their PFI demands. Not that the PFI is necessarily the best route for public services anyway – an RICS survey overleaf suggests that surveyors have found the cost and duration of the PFI process to have increased since 1997, probably due to increased legal and financial regulatory burdens.
Capital investment in schools 1996/97
Spend in 2005/06 (including PFI expenditure)
But the DfES now seems confident that the scheme will fly. It has allowed the civil servant in charge of the programme, Peter Stanton-Ife, to leave to secure more lucrative work in the private sector with Ernst & Young, and hasn’t directly replaced him with someone wholly dedicated to the secondary schools programme. Instead it has set up a capital investment team to handle both BSF and the government’s recently-announced primary school rebuilding work.
Two years ago a leading civil servant told Building: “Having secured funding, there is a realisation that we need to put ourselves in a position to deliver. There is a desire not to waste this opportunity.” On the whole, the government hasn’t.
What they’re promising this time:
I’m wondering if there is going to be enough throughput for a little while – I’m hoping that there isn’t going to be a lag in activity
Andy Sturgess, Galliford Try
Rebuilding of every secondary school in the future over 10-15 years – initially at £2.2bn a year; £9.4bn over the next five years to be invested in new primary schools and redevelopment.
What they promised last time around:
100 new hospitals by 2010
Debatable – 31 schemes started in 2001/04. The aim was 46, although the definition of ‘hospital’ appears to have changed
The state of the NHS has been a thorn in the side of practically every government since the post-1945 Attlee administration set up the main structures of what became the welfare state. Unsurprisingly, the current government attacked the state of hospitals in 1997 – one of its five key pledges was to “increase spending on the NHS in real terms every year” – and has spent the second term desperately trying to defend the progress it has made.
The big pledge for its second term was to build 100 hospitals by 2010. Last weekend, health secretary John Reid trumpeted how well Labour was doing on major hospital schemes, arguing that 16 worth more than £50m are already operational. He compared this with the mere two that the Tories built under the premiership of John Major.
Whether or not it is performing better than the Tories, it cannot be certain if Labour is really meeting its pledge. The Construction Products Association estimates that nine starts per year are necessary to reach the 100 target. Moreover, Morton Hall, head of PFI health at KPMG, says that there seems to have been “a lull in an announcement of new deals”. This could suggest that Labour is falling behind its 2010 target.
Number of new treatment centres promised by 2004
Number of new treatment centres completed by 2004
Number under development
Yet senior officials at the Department of Health have told Building that they could be about a year ahead of schedule. If this seems odd, it is because the definition of what a “new” hospital is has been malleable. Whereas in the past it has been assumed that Labour was talking about major work, be it whole new hospitals or vast extensions, worth £25m or more, the lack of definition could allow ministers to scale down their ambitions. As one senior official concedes: “It is not clearly defined – they are simply defined as ‘major redevelopments’.”
It seems that many of the new hospitals will be clinical centres, with smaller capital costs. Perhaps it is unsurprising that the government is turned off larger schemes, which are procured through the PFI. The heavy delays and potential scrapping of the £800m Paddington hospital in west London has been a huge embarrassment, and major contractors are considering exiting a market that can cost them anything up to £25m in failed bid costs. The £300m Plymouth hospital has been so unpopular that it is left with only one bidder. Like Paddington, this means it faces an uncertain future as there need to be at least two bidders to meet European Union competition regulations.
Capital investment in hospitals 1996/97
Capital investment in 2004/05
Still, Reid is keen to point out that Labour’s record on hospital capital expenditure outstrips the Tories, the government having spent £3.4bn in 2004/05 compared with £1.3bn in the last year of the previous administration. On the campaign trail, Reid says: “It speaks volumes for the neglect of the NHS under the Tories that by the mid-1990s, almost half of all NHS buildings were older than the NHS itself. [Under Labour] that figure has already been halved.”
Perhaps. But this has not stopped contractors from moaning about certain key initiatives. Procure21 has received the most groans. The scheme is the NHS’ flagship procurement framework for work valued at more than £1m. Contractor Pearce left the framework last year, over frustration at the lack of work coming through. In its defence, the programme’s manager, NHS Estates, argued in October that Procure21 exceeded its five-year turnover target of £1.2bn after one year.
Contractors remain unconvinced. Earlier this month the chief executive of one of the 11 remaining contractors wrote to the government seeking confirmation that the scheme has a future after the election. The letter, from Kier boss John Dodd, expressed fears that this month’s abolition of NHS Estates would endanger the scheme.
What they’re promising this time:
The target for 100 new hospitals remains, with an additional 50 “community” hospitals announced last week by health secretary John Reid.