Further letter from the Parliamentary
Clerk, Department of Health, to the Clerk of the Committee
I am writing to address the issues raised by
the Public Expenditure Inquiry at the hearing held on 8 November.
The points below are cross-referenced to the
paragraph number in the transcript of the hearing.
PARAGRAPH 297—THE
PROPORTION OF
THE NHS INFRASTRUCTURE
THAT IS
MORE THAN
50 YEARS OLD
1. An age profile undertaken during 2000
indicated that 33 per cent of the national estate pre-dates the
establishment of the NHS in 1948. It also showed that around 6
per cent of the estate had been constructed since 1995. The hospital
building programme that it is now underway will mean that by 2010
40 per cent of the estate will be less than 15 years old.
PARAGRAPH 300—THE
BED NUMBERS
AT THE
NORFOLK AND
NORWICH PFI SCHEME
2. The figures quoted by the Secretay of
State for Norfolk and Norwich are for the total current number
of staffed in-patient beds (ie at June 2000) and those to be provided
under the PFI solution—955 and 953 respectively—and
are the figures set out for this project in Annex A.
3. The figures of 1,120 and 1,008 quoted
in line 300 for 1995-96 are different from the physical stock
of beds, which the NHS Executive's NBI compliance exercise and
the figures provided to the Health Select Committee in June looked
at. The figures of 1,120 and 1,008 are for "bed availability":
these come from the Department of Health statistical bulletins
and use a measure of the "Average daily number of available
beds" which is defined as the "number of bed days in
the year divided by the number of days in the year".
4. The figure of 809 is a figure for the
physical stock of beds under the PFI solution which appeared in
Hansard in February 1999; this was before the addition of 144
beds to the final PFI option (see the table in Annex A).
PARAGRAPH 300—THE
BED NUMBERS
AT THE
BISHOP AUCKLAND
PFI SCHEME
5. The bed number figures given for Bishop
Auckland need to be updated as a result of the further research
work on bed numbers described at Paragraphs 15 and 16 below is
the response to the undertaking given by the Secretary of State
at Paragraph 304.
6. As can be seen from the table at Annex
Athe figure of 347 quoted for the total number of beds to
be provided under the PFI solution is correct (the figure of 304
provided in the evidence to the Health Select Committee in June
excluded day-case beds as requested by the Committee).
7. Bishop Auckland was one of the first
PFI schemes and had a long development period. The Trust first
reported a change from 375 to 308 for the current number of beds
in December 1998; 308 appeared in the Hansard table of February
1999 with a footnote noting the reason for the change. However,
when officials approached the Trust in May and June 2000 to collect
the bed numbers for the Health Select Committee evidence and the
internal NHS Executive NBI compliance exercises, the Trust reported
that to compare the PFI solution with the current number of beds,
the 46 elderly care beds currently at Tindale Crescent Hospital
should be included in the latter figure as these are transferring
to the Bishop Auckland site under the PFI solution.
8. This has always been the intention under
the PFI solution and the appropriate figure for total "number
of beds at present" should therefore be 354 (334 plus 20
day case beds).
PARAGRAPH 301—THE
COST TO
VARY THE
CONTRACT ON
THE NORFOLK
SCHEME TO
CREATE THE
ADDITIONAL 144 BEDS
9. I understand that the Committee has written
direct to the Trust to get more detailed explanation of this scheme.
The total cost of providing the additional 144 beds is estimated
as being £16.5 million, of which £1 million was provided
from charitable sources. The asset provided by a PFI scheme is
of course paid for by means of an availability payment. This is
paid over the life of the contract, typically 30 years. The provision
of the additional 144 beds will increase the annual availability
payment paid by the Trust by £1.779 million a year, at today's
prices.
PARAGRAPH 304—THE
BASELINE USED
FOR CALCULATING
THE GAINS
AND LOSSES
IN BED
NUMBERS
10. The figures on bed numbers given by
the Secretary of State in Paragraph 303 were obtained from the
34 Trusts in June for the internal NHS Executive NBI compliance
exercise. This exercise looked at the current number (defined
as June 2000) of General and Acute (G&A) beds compared to
the numbers of these beds to be provided on completion of the
new facilities and the current plans for the provision of intermediate
care beds in the local health economy.
The exercise covered all schemes ove £10
million in value currently in procurement whether provided under
PFI or the conventionally funded route. The figures quoted to
the committee on 8 November were the results of interim work and
are the same as those quoted by officials on their appearance
before the committee on 2 November.
11. A set of further refined figures were
provided to the Health Select Committee in this letter from John
Innes of 7 November. Since then the two final outstanding queries
have been resolved as follows:
(i) North Durham NHS Trust have confirmed
one change—their figure for the "current" number
of G&A beds has changed in the final table at Annex B
from 499 to 464 (the 499 figure included day case beds);
(ii) United Bristol Health Care NHS Trust
have confirmed that 21 of the 42 G&A beds they are to gain
on completion are in fact transfers from other Trusts. The net
gain is therefore 21 beds.
12. The final spreadsheet with the final
figures for each individual Trust is provided at Annex B.
The textual summary and summary tables which appeared in the letter
of 7 November have been amended to give the final position as:
— Of the 34 schemes over £10 million
in value currently in procurement, 25 were PFI projects and nine
were publicly funded.
— In total, the 34 schemes plan to
decrease the G&A beds by 479 (this was made up of a 287 reduction
in the 25 PFI schemes and a 192 reduction in the nine public funded
schemes). This represents an average loss in the PFI schemes of
11 G&A beds and 21 G&A beds in the publicly funded schemes.
— In the 25 PFI schemes, the 287 G&A
beds lost had been counterbalanced by the creation of an additional
628 intermediate and other beds put in place elsewhere in the
local health economy, giving net local net gains of 341 beds.
— In the nine publicly funded schemes,
the 192 G&A beds lost had been counterbalanced by the provision
of 106 intermediate and other care beds elsewhere in the local
health economy, giving net local losses of 86 beds.
— Overall, there has been a loss of
479 G&A beds, counterbalanced by the provision of 734 other
beds, giving a net gain of 255 beds:
|
| No of schemes
| Change in G&A bed numbers in the schemes
| Known intermediate care and other bed provisions
| Net bed position |
|
| 25 PFI Schemes | |
| | |
| Schemes gaining G&A beds | 7
| +121 | 0
| +121 |
| Schemes with no gain/loss | 3
| 0 | +41
| +41 |
| Schemes losing G&A beds | 15
| | | |
| —covered by other provisions
| 7 | -203
| +503 | +300
|
| —not yet covered by other provisions
| 8 | -205
| +84 | -121
|
| SUB-TOTAL | | -287
| +628 | +341
|
| 9 Publicly Funded Schemes |
| | | |
| Schemes gaining G&A beds | 2
| +24 | +32
| +56 |
| Schemes with no gain/loss | 1
| 0 | 0
| 0 |
| Schemes losing G&A beds | 6
| | | |
| —covered by other provisions
| 1 | -4
| +59 | +55
|
| —not yet covered by other provisions
| 5 | -212
| +15 | -197
|
| SUB-TOTAL | | -192
| +106 | -86
|
| OVERALL TOTAL | | -479
| +734 | +255
|
|
13. At Trust level the NBI compliance exercise considered
the position of the physical stock of staffed in-patient G&A
beds. The footnote at the base of the table at Annex B makes it
clear that these figures exclude non-G&A specialisms such
as maternity and day-case beds.
14. The Health Select Committee were provided with a
table containing the number of "overnight" beds at the
PFI Trusts examined in the NBI compliance exercise together with
the other "second" and "third" wave major
PFI schemes and four publicly funded schemes. These figures were
for the total physical stock of staffed in-patient beds excluding
day case beds, and the totals therefore differ from those of the
NBI compliance exercise. The figures for this exercise were collected
from NHS Trusts in May and June 2000, the same month as for the
NBI compliance exercise, so the baseline for the figures for both
of these exercises can be fixed as June 2000. This is particularly
important for the figures for the number of "current"
beds which we provide, which are necessarily a snapshot of the
position at any one time and can vary considerably at the margins
as wards are opened and closed.
15. Because the two tables are different we have therefore
prepared a table which reconciles the two sets of figures for
all the 19 major PFI schemes which have reached financial close.
We will do a similar exercise for the remaining 15 schemes examined
in the NBI compliance exercise. We have focused on the major schemes
to start with as this provides us with the opportunity to also
reconcile these figures with those which regularly appear in Hansard,
and which are on a different basis: in Parliamentary Questions
we are usually asked to provide figures for all in-patient staffed
beds ie: G&A plus maternity and other specialisms plus day-case
beds. The final totals for each Trust in the table at Annex A
are therefore intended to reconcile with the last time the figures
for the total numbers of beds appeared in Hansard, which
was in February 1999 (Hansard 2 February 1999 Volume 596
Column 202-206).
16. The figures for the February 1999 Hansard table were
collected nearly two years ago now so we have provided footnotes
for all the significant changes. Officials are confident that
these represent the final figures for these schemes with a baseline
of June 2000.
PARAGRAPH 312—AN
EXPLANATION OF
THE IMPACT
ON THE
ACCOUNTING TREATMENT
OF PFI SCHEMES
17. The Committee asked why PDC dividends paid by NHS
Trusts appear to rise post PFI. It also queried why Trusts continued
to charge depreciation once a PFI scheme becomes operational.
18. To provide a full comparison the pre PFI figures
should have also included interest paid on Interest Bearing Debt
(IBD) as well as dividends paid on Public Dividend Capital (PDC).
Up until 1999-2000, NHS Trusts were financed by a combination
of IBD and PDC issued by the Secretary of State. The IBD was a
loan that was remunerated by the payment of interest and principal.
The PDC is like share capital, which is renumerated by the payment
of dividends. To simplify the financial regime of the NHS Trusts,
the IBD was fully replaced by PDC in 1999-2000. This did not reduce
the indebtedness of Trusts to the Secretary of State. The table
attached below shows the interest paid by the Trusts specifically
raised by the Committee—Calderdale, St George's and Dartford
and Gravesham. A fully amended table 4.9k is attached as Annex
C.
19. NHS Trusts will continue to pay PDC dividends and
charge depreciation when PFI schemes become operational. This
is because the Trusts will continue to own assets. Many of the
PFI schemes are extensions to existing facilities rather than
being totally new hospitals. For example, the St George's PFI
scheme provides a cardothoracic and neuro-sciences development,
but the remainder of the services will continue to be provided
from facilities owned by the Trust.
20. Also, PFI schemes do not provide all the equipment
needed by a Trust. The Trusts will continue to purchase and own
significant amounts of equipment. As the new PFI facility is commissioned,
much of the equipment will be new rather than transferred from
the old site. The new equipment will have a higher value than
what it replaces thus increasing the depreciation charge of the
Trust. This is perfectly reasonable.
21. The Committee asked for a basic guide to PFI. Attached
are extracts from an Introductory Guide to NHS Finance in the
UK, which provides an overview of PFI and the NHS Trusts Capital
Accounting Manual which gives more detail. Officials are willing
to meet the Committee and explain the issue.
|
| | Pre PFI1
£000
| Post PFI
£000
|
|
| Calderdale Healthcare NHS Trust | Income
| 80,726 | 100,000
|
| —PFI
| | 15,254
|
| —Depreciation
| 1,612 | 1,200
|
| —Interest
| 1,060 | |
| —PDC dividends
| 1,117 | 2,380
|
| Dartford and Gravesham NHS Trust | Income
| 59,114 | 57,783
|
| —PFI
| | 17,700
|
| —Depreciation
| 2,488 | 2,552
|
| —Interest
| 2,292 | |
| —PDC dividends
| 1,478 | 4,333
|
| St George's Healthcare NHS Trust | Income
| 185,927 | 205,124
|
| —PFI
| | 6,804 |
| —Depreciation
| 7,546 | 9,785
|
| —Interest
| 4,322 | |
| —PDC dividends
| 3,673 | 7,053
|
|
1 Source: Audited Accounts 1998-99.
I apologise for the delay in supplying this information to
the Committee but I hope this addresses all the issues raised
on 8 November 2000.
13 February 2001
| 
