Table 4.8e.2
SOURCES AND APPLICATION OF HCHS CAPITAL,
1997-98 and 1998-99
£ million
| | Plan
| Forecast | Plan (1)
|
| | |
Outturn (1) | |
| | 1997-98
| 1997-98 | 1998-99
|
Sources: | Net Capital HCHS Expenditure
| 1,315
| 1,086
| 1,216
|
| Plus: |
| | |
| NHS trust capital receipts
| 45
| 206
| 58
|
| Retained estate receipts
| 244
| 230
|
214
|
| Total capital receipts
| 289
| 436
| 272
|
| Gross HCHS Capital Expenditure
| 1,604
| 1,522
|
1,488
|
Applications: | Retained estate costs (2)
| 33
| 51
| 49
|
| NHS trust capital receipts spent as capital (3)
| 45
| 147
| 58
|
| NHS trust capital receipts spent as revenue (3)
|
| 59
|
|
| Non NHS trust capital spend (4)
| 78
| 44
| 91
|
| Initial transfers to revenue (5)
| 194
| 194
|
200
|
| NHS trust voted capital |
1,253
| 1,027
| 1,088
|
| Total Capital Applied
| 1,604
| 1,522
|
1,488
|
Financing of
NHS trust capital:
|
Depreciation (6) | 943
|
943
| 966
|
| External Financing Limit (EFL)
| 310
| 83
| 122
|
| Total NHS trust voted capital
| 1,253
| 1,027
|
1,088
|
| Plus: |
| | |
| NHS trust capital receipts spent as capital
| 45
| 147
| 58
|
| Total capital spent by NHS trusts
| 1,298
| 1,174
|
1,146
|
Financing of EFL: | Net Borrowing from Secretary of State Voted in Estimates (7)
|
362
|
95
|
22
|
| Change in Market Borrowing (Non-Voted) (8)
| 52
| 12
| 100
|
| EFL |
310
| 83
| 122
|
Footnotes:
|
| | | |
1. The outturn position for 1997-98 is in line with the
figures in Table 2.1.1. The figures for 1998-99 HCHS capital are
only the original plan. They do not reflect adjustments to plan
made at Main Estimates or any in-year changes and therefore do
not match those in Table 2.1.1.
2. These are the costs associated with the maintenance
and disposal of the NHS retained estate funded from gross capital
receipts on the retained estate.
3. These are the capital receipts generated from the
sale of NHS trust assets. These receipts can be spent in addition
to those voted in estimates. It is forecast that of the £206
million NHS trust capital receipts available in 1997-98 £147
million will be spent as capital and £59 million as revenue
by NHS trusts.
4. This is capital which is not spent by NHS trusts and
is spent in Health Authorities or by Special Health Authorities
such as the National Blood Authority and the Prescription Pricing
Authority.
5. This is to cover:
(i) the higher capital threshold in the NHS;
(ii) capital expenditure on Joint Finance and GMS which
are recorded as revenue as they are spent by a third party.
6. The element of capital charges included in HCHS revenue
but earned by NHS trusts in prices and used to finance capital
expenditure and/or repayment of principal on debt.
7. Net lending from voted monies to support NHS trust
capital expenditure and short-term cash flow needs.
8. The movements in borrowing cash and investments outside
the public sector of monies not voted in estimates in this financial
year.
9. Figures may not sum due to rounding.
4.8f Would the Department provide a breakdown of the net
present value calculations upon which decisions about the private
finance option are based? Would the Department indicate the sensitivity
of these estimates to assumptions on factors such as risk, rate
of interest, length of contract?
1. PFI offers better value for money by giving the private
sector the incentive to use its skills and experience for the
benefit of the NHS. PFI is not constrained by capital so more
innovative design solutions can be put forward. In addition, PFI
contracts are structured so that the private sector companies
that provide the hospital facility have the same interests as
the NHS in ensuring that a hospital is built and maintained to
the highest standards. Where they are best placed to manage, risks
are transferred to the private sector. Thus the risk of construction,
time and budget overruns, standards of service support and maintaining
the hospital in a fit state rest with the private sector. This
enables the NHS to concentrate on its core functions and allow
PFI to offer the taxpayer better value for money than traditional
procurement.
2. Value for money for the public sector is assessed
by comparing the costs and benefits of the PFI option with the
costs and benefits of providing a hospital with the same level
of health care output from public funds. Since the cost of the
PFI option will include the value of risk which has been transferred
to the private sector, but the publicly funded solution excludes
the costs of risks we retain, a simple comparison of costs puts
the PFI option at a disadvantage.
3. Therefore, as part of the economic appraisal, there
is a requirement to include the expected value of risk held by
the public sector under each of the options. By adjusting for
the costs of the risks retained, it ensures comparisons are made
on a like for like basis. The tables listed below do not allow
direct comparisons between the different schemes. Investment appraisal
conventions allow different approaches to counting costs. For
example, provided the conventions are consistently applied in
each appraisal, costs common to both alternatives can be either
included or excluded and differences in costs can be scored rather
than actual costs. Unless all the appraisals are re-calculated,
it is not possible to say what basis costs have been included.
4. The robustness of the ranking of the options is tested
using sensitivity analysis. The effect of varying assumptions
regarding the costs of risks are carried out in each case. Each
scheme has a different risk profile so without conducting a detailed
analysis of each business case it is not possible to provide reliable
information.
5. The risks most commonly tested for sensitivity are
interest rates, inflation, and variations in the construction
cost and timetable of the public sector comparator. Generally
speaking, because many of the costs of the PFI option are fixed,
the changes that could affect the financial appraisal ranking
relate to the public sector comparator costing less to build than
anticipated.
6. The interest rate is determined at financial close
with the purchase of fixed rate funding. It may change between
approval of the full business case and financial close. If the
rate of interest changes sufficiently to alter costs by more than
10 per cent, or to change the ranking of the options, full business
case approval lapses, and the case must be re-submitted.
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