After the last-minute announcement from Oldham’s Clinical Commissioning Group (CCG) that the planned redevelopment of Shaw and Crompton’s Health Centre would not go ahead as currently planned, Shaw councillor and Liberal Democrat Opposition Leader Howard Sykes and Crompton councillor Louie Hamblett, the health and social care spokesperson, have held a meeting with CCG representatives to get answers for the delay and to push for the work to go ahead.

“I have already got assurance from Oldham Council (the Chief Executive) they will keep the land for this project and do what they can to make this happen,” stated councillor Sykes.

At an urgent meeting on April 7 the CCG set out the “unforeseen” factors that had contributed to its decision including a rise in the cost of building materials.

Councillor Sykes said: “It is bitterly disappointing for our community that the CCG have taken this backwards step.  Residents rightly expect healthcare services across Shaw and Crompton to be there when they need them. We demanded a full update from the CCG who have given assurances that everything will be done to overcome this recent setback. We have been clear that residents expect action and not finger pointing.  It was a very full and frank meeting.”

In a detailed letter sent to councillor Sykes after the meeting, the CCG acknowledged the ‘robust challenge’ from Crompton and Shaw’s Liberal Democrat representatives and set out the details actions it would take to try and resolve the situation and the reason for its last-minute decision.

Welcoming the CCG’s letter, councillor Sykes said, “The CCG have indicated the steps it will take to move this situation forward, and we are clear that the focus must be on delivering the modern health care facility that our communities deserve. With hundreds of new homes being built in the area, we cannot afford for the CCG and others to sit on their hands.”

“It was a positive meeting and I take the CCG at their word that they will do all they can to get this project back on track. They have spelt out the challenges with the original proposal and what they are going to do to address them. However, this is an NHS project. We will continue to push for action as we always have done. Residents in Shaw and Crompton have waited far too long for this much needed redevelopment,” he added.

Copy of CCG letter to councillor Howard Sykes

Dear Howard,

Shaw Health Centre Redevelopment

I wanted to thank you and Cllr Hamblett for agreeing to set up the meeting with my team; we are grateful for the opportunity to discuss the current situation in relation to the proposed redevelopment of Shaw Health Centre. I also wanted to say that the robust challenge from yourselves as elected members was more than heard and that we are clear about the feeling of disappointment within the community. We too are frustrated and disappointed in equal measure.

Before I turn to some specifics, I do wish to put on record that the decision by Oak Gables to publish our initial letter has been extremely unhelpful and served only to raise anxiety within the community. Developments of new buildings can often be challenging and complicated. For the record, at no point has the CCG ever said it was not committed to resolving the complications that have now arisen; in fact our letters with the Practices inform them that as matters have changed and that we all now need to work together to identify how we now tackle this new challenge.

I want to also confirm that I have spoken directly with the Council Chief Executive and his Director of Regeneration to seek their assurances of their continued commitment to work with us as they are in fact the landowners of the site we wish to purchase. Raising unnecessary anxiety, as you know, could have jeopardised the Council’s confidence and commitment in this type of scheme so, I wanted to assure you that we are working closely and continue to do so.

I also wanted to confirm that the current building is also occupied by another GP Practice – The Village. Upon receipt of our letter the Village Practice immediately picked up the phone and (a) asked how they could work with us to try and resolve this and (b) if they could meet with us to discuss matters. No such calls have been received from Oak Gables and my team is trying get a date in the diary to meet with the Practice. I am hopeful they will come around the table soon.

Background to the redevelopment

During the meeting we outlined the timeline by which we had been working to. In summary, we signed off an outline business case based (OBC) on a specific cost neutral model in the autumn of last year. That cost neutral model involved accessing an agreed £3m capital grant from NHS England to support the build cost with the ongoing revenue for rental etc. being within existing funding levels.

Around seven days ago as we received the final development reports to inform the revised costs for the CCG to sign off on, however, given what has become a very pressured financial environment within our national economy, that final pricing scheme was impacted by factors outside of the control of the Oldham system. Nobody could have foreseen inflation rising to circa 7% as it now is nationally. By way of background our OBC was constructed in such a way as to use capital financing to develop a c.1500m2 new health centre and then the building costs would be offset over time through rental income from the Practices. That is not an unusual form of business case for schemes of this nature.

What has changed

I want to try and provide as simple an explanation as I can so hopefully this will be helpful in assisting you as elected members answer any queries from your residents. In short, the following are the key areas of change:

• There has been a 25% increase in build costs since November 2021. By way of explanation, the scheme was always designed in such a way as the developer (in effect the new landlord) would use the capital grant to build the building and then generate a rental income at the current rates of rent. However, building and material costs have risen to such an extent that those increases are beyond the capital grant value and the only way for the developer to claw them back is to pass them directly back in terms of increases in rental income which then creates a significant recurrent revenue consequence.

• There has been a requirement to make adjustments to building designs to achieve a Net Zero Carbon operational development which was not part of a development specification previously.

• The scheme has needed to become a Third Party Development rather than a GP owned development which attracts VAT being levied on the rental expenditure on our part, which increases the cost.

• There are a number of additional ‘one-off’ costs which would have always been there but are significantly more expensive now to accommodate again rising prices.

• A significant increase (100%) in the ongoing service charges for the new facility from those originally planned for in the business case and again resulting directly from the national increase in inflation.

In financial terms, these are adjustments including the ‘one-offs’ without any mitigations in place, created a financial gap of £0.5m. As the Accountable Officer, I am not personally in a position to agree to close that type of gap from other budgets or other service areas. Nor do we believe that with such dramatic shifts (£0.5m on a £3m business case) we can justify the business case as written proceeds.

We of course recognise the need for a new facility in Shaw and we remain committed to trying to make that a reality. On a personal note, my senior team and I have been in Oldham for four years this year. We understand the 15-year history behind this development and we are frustrated as to why this matter was not resolved prior to our arrival – our review of the situation clearly suggests it could have been. That said we now need to focus on what we can do next about this.

What are we doing

We in the CCG do not believe all is lost yet. What has happened is the original business case and therefore design concept has become unaffordable. There are a number of things we now need to do. I have already set such matters in hand regardless. By way of some examples of these actions we are taking, they include:

• A review of the cost increase to identify potential opportunities to mitigate costs.

• A further set of discussions with the developer to revise the building itself and reduce the costs by making changes to the building design. By way of example, reducing the overall floor space or reducing the number of floors.

• Open a dialogue with NHS England to seek additional capital grant and thereby

reducing the ongoing level of revenue increases to fund the rental price changes

• Challenging the service change assumptions and changing the contractual nature to reduce the risk of cost creep.

I am pleased to say that The Village has proactively engaged and over the last few days has been working with us. At the time of writing this letter Oak Gables has now written to say they will now work with us. There are other ways Practices can resolve their premises development needs – it does not have to be through us as they are private businesses in their own right.

Finally, we will now of course also try and answer the multitude of queries we are getting from local people at the same time. I would suggest that we arrange for a regular briefing update with your elected member ward team to ensure you are able to challenge us and put your residents’ views across to us as effectively and efficiently as possible. I trust you will find that acceptable and appropriate.

Yours sincerely,

Mike Barker, Accountable Officer, NHS Oldham CCG