MEMORANDUM BY THE DEPARTMENT OF HEALTH
(CONT.)
(ii) Could the Department include a commentary
explaining the key factors that determined those percentage growth
increases shown in the table?
2. The initial allocation of resources for
2000-01, announced in December 1999, aimed to balance two objectives:
(i) to maintain continuity and stability
in the service; and
(ii) to move as quickly as practicable to
fair shares as represented by weighted capitation targets.
3. These two objectives were pursued via
the distribution of resources from both the Modernisation Fund
and from general funds.
4. The first objective was pursued by distributing
some additional funds to all health authorities. The second objective
was pursued by distributing the remaining funds mainly to bring
under target Health Authorities nearer to their weighted capitation
target.
5. The Modernisation Fund elements of allocations
were distributed in two ways:
(i) as part of allocations:
— £276 million for tackling waiting;
— £60 million for primary care;
— £21.9 million for adult mental
health;
— £79 million for information
management and technology;
— £9 million for cancer (gynaecological).
— £15 million for adult mental
health funding has been targeted to deliver an extra 250 secure
places;
— £5 million for adult and adolescent
mental health services has been distributed to all Health Authorities
using the psychiatric needs indices of the weighted capitation
formula.
6. The distribution of the additional £660
million in March 2000 is covered in question 1.8.
(iii) Could the Department update the Committee
on recent developments in allocations of HCHS resources and provide
the timetable for any planned changes?
7. There have been no recent developments.
The wide ranging review of the formula used to make allocations
to Health Authorities and Primary Care Groups/Trusts is still
in progress.
8. Other than routine data changes, the
current freeze to the formula will last until at least 2001-02.
4.6 Capital Charges
Could the Department give an account of the funding
system for capital charges, including the basis on which funding
is allocated, whether by formula or otherwise? Could the Department
explain the reasons for and the significance of the reclassifation
of Trust Debt Remuneration as an appropriation in aid in 1999-2000?
1. The funding system for capital charges
is a circular flow of funds at national level.
2. Capital charges are estimated annually
by Health Authorities and NHS trusts in advance. The estimated
level of capital charges is added to the funds agreed during the
Spending Review. Funding for capital charges is then allocated
to Health Authorities as part of their general allocations. For
NHS trusts the costs they incur on capital charges must be met
from the income they earn from service agreements with Health
Authorities. The depreciation element is retained by the NHS trust
to help fund the capital and the cost of capital element is repaid
to the Department as Trust Debt Remuneration (TDR).
3. From April 1999 this has been treated
as Appropriation in Aid of the Vote. Previously the receipt was
accounted for as an Extra Receipt to the Consolidated Fund. This
is a technical reclassification. The principal change is to the
system of Parliamentary reporting under which the Departmental
Expenditure Limit (DEL) replaces the old Control Totals. TDR is
included in the DEL both as a provision to Health Authorities
and receipt from NHS Trusts. This is because Departmental DELs
should contain all the expenditure which they control.
4. The reclassification of TDR has no effect
on the way the capital charges funding system works for the NHS.
4.7 HCHS Capital Prioritisation
Could the Department explain the process by which
the Capital Prioritisation Advisory Group makes decisions, including
the basis on which schemes are prioritised for public and private
funding, and the criteria used to allocate schemes to private
or public funding? Could the Department give examples of schemes
which have been turned down, and explain why?
1. Ministers make the decision on the prioritisation
of major investment schemes. The role of the Capital Prioritisation
Advisory Group (CPAG), assisted by a technical sub-committee,
is to assess the proposals for major investment and report to
Ministers.
2. The Schemes are prioritised on the basis
of health service need. CPAG is responsible for developing the
criteria against which this is assessed, and reporting on each
scheme against these criteria.
3. CPAG assesses schemes on the basis of
information contained in a document known as the Strategic Outline
Case (SOC). Regional Offices are responsible for deciding, based
on regional priorities, which schemes should prepare a SOC. The
SOC document is written jointly by the Regional Office and the
relevant health authority and NHS trusts, and is presented to
CPAG by the scheme sponsors for clarity. Each site with a proposed
development is visited by members of the Technical Sub-Committee
who report their findings to CPAG. CPAG then advises Ministers.
4. The decision on private or public finance
does not form part of the prioritisation process. Once prioritised
by Ministers the scheme is subject to the normal business case
approval procedures. Although it has been demonstrated that PFI
offers the public sector value for money, and it is our expectation
that the majority of major projects in the NHS will be funded
using PFI, each project is assessed on an individual basis. It
will have to be demonstrated in a Full Business Case that the
PFI option is affordable to the NHS, meets NHS service needs and
offers value for money when compared to the publicly funded alternative.
These value for money appraisals are carried out by the NHS trust
and the NHS Executive, not the private sector.
5. The number of schemes which can be prioritised
at one time is limited because of constraints on overall affordability
within the NHS. The following are examples of schemes which were
not privatised at the time a SOC was put to CPAG.
(i) Leeds Teaching Hospitals NHS trust
This scheme was not prioritised on the second
wave of major schemes announced in April 1998. The proposal was
to create an oncology wing at St James's Hospital to allow relocation
of radiotherapy services. Although there was a clear clinical
need for this scheme, Ministers felt that the case would be strengthened
by expanding its scope to include other aspects of rationalisation
of acute services in and around Leeds.
The scheme was reconsidered and reshaped to complete
the rationalisation of acute services, and was given priority
in the third wave of major schemes announced July 1999.
(ii) Portsmouth Hospitals NHS trust
This scheme was not prioritised in the second
wave of major schemes announced in April 1998. The scheme involved
the rationalisation of acute services from three sites onto one.
There was a strong clinical need for the scheme, but Ministers
felt that it would be better considered when local uncertainty
surrounding the future of the military hospital at Gosport had
been resolved.
The closure of the military hospital was subsequently
announced, and the scheme was given priority in the third wave
of major schemes announced in July 1999.
4.8 LONG TERM
CAPITAL PROJECTS
AND PFI
(i) Could the Department provide a table
showing all publicly funded capital projects with a total cost
above £10 million which are under construction during 2000-01?
Could this also show the original and current estimated completion
dates along with a percentage figure for any additional time overrun/saving?
Likewise, the original total cost and current estimated out-turn
cost should be provided along with a percentage cost performance
figure.
Could the Department provide a commentary on cases
where there are significant discrepancies between original estimates
of completion dates and/or expenditures and current estimates?
(ii) Could the Department provide details
of PFI projects with a capital value of £10 million or over
approved since 1992, including their current status?
(iii) Could the Department
provide tables showing the planned and actual annual contribution
to capital from PFI, and the forecast level of investment generated
by schemes over £10 million, plus an aggregate of those below
£10 million, between 1997-98 and 2002-03? What revenue or
transitional support is being given to support the scheme? Could
the Department provide further details of locally agreed arrangements
to provide revenue or transitional support to schemes?
(iv) Could the
Department provide a table showing the increases to the capital
cost of schemes since the last expenditure questionnaire and provide
a commentary on changes of more than 10 per cent? In
addition, could the Department provide the intitial costs of PFI
schemes at outline business case (baseline year) for those schemes
reported in last year's questionnaire and comment on increases?
(v) Could the
Department provide data on the revenue consequences of schemes
which have reached financial close and represent long term contractual
commitment over the next 25 years? Could the Department provide
an update on the Departmental Report table showing the source
and applications of HCHS capital, giving the outturn position
for 1999-2000?
(vi) For major projects (currently defined
as those greater than £25 million in value), could the Department
please provide a comparison between the PFI price and the publicly
financed option. The publicly financed comparator's costings should
be broken down as follows:
Basic construction contract, broken down between
pre-implementation and post implementation costs;
The value of risk adjustment, again broken
down between pre-implementation and post implementation costs,
in both pounds and percentage terms, and
The final total real full life cost of both
options.
Where adjustments have been made to the PFI
costs (to bring prices to a like for like basis), these should
be broken down on the same basis as the publicly funded option.
Could the Department also provide a brief
commentary on any apparent differences between the reported schemes.
(vii) Could the
Department update the information given in Table 4.8g on donated
capital additions by region only?
(viii) Could the Department list, by scheme,
how much has been spent on developing business cases for a sample
of schemes worth over £10 million, identifying which schemes
are publicly financed and which financed through the PFI? Where
schemes have reached completion, could the estimated development
costs be compared with actual costs?
(ix) Could the Department detail for every
NHS trust with a hospital development, whether publicly or privately
financed, worth over £25 million (a) the number of NHS overnight
beds by category currently provided by the trust and (b) the number
of NHS overnight beds by category to be provided when the development
is completed?
(x) For each PFI scheme could the Department
provide the estimates of the unitary fee and split between the
availability and facilities management fee at outline business
case (baseline year) and the actual cost of the unitary fee split
as above on signing off the FBC? Could the Department comment
on how any increases were funded?
(xi) For each PFI scheme signed or given approval
in principle, could the Department provide income and capital
charges of Trusts which make up each PFI scheme prior to signing
and income, availability fee and capital charges on retained estate
for each scheme having signed, or estimates for those schemes
which have not yet signed?
(i) Could the Department provide a
table showing all publicly funded capital projects with a total
cost above £10 million which are under construction during
2000-01? Could this also show the original and current estimated
completion dates along with a percentage figure for any additional
time overrun/saving? Likewise, the original total cost and current
estimated out-turn cost should be provided along with a percentage
cost performance figure.
1. Table 4.8.1 provides details of all publicly
funded long-term capital projects with a total cost of over £10
million which are forecast to be under construction during 2000-01.
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