House of Commons - Health

Select Committee on Health Memoranda

Memorandum by the Department of Health (Continued)

4.5b Could the Department include a commentary explaining the key factors that determined those percentage growth increases shown in the table?

2. Every HA has received a general increase to meet the pressures on pay, prices and the cost of implementing NICE recommendations etc that they all face calculated pro rata to baselines. Funding for implementing the NHS Plan was issued pro rata to weighted capitation targets.

4.5c Could the Department update the Committee on recent developments in allocations of HCHS resources and provide the timetable for any planned changes?

3. A wide ranging review of the existing weighted capitation formula is currently taking place.

4. An incremental approach has been adopted to the review. The first fruit of the review has been the introduction for 2001-02 allocations of the interim Health Inequalities Adjustment based on rates of years of life lost (YLL). The adjustment includes YLLs for circulatory diseases, all cancers, accidents, suicides and undetermined injury.

5. The NHS Plan includes a commitment to a single resource allocation formula covering all NHS spending including general medical services non cash limited (GMSNCL) expenditure. Delivery of the new GMSNCL element of the formula is on target for 2002-03 revenue allocations.

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 reclassification of Trust Debt Remuneration as an appropriation in aid in 2000-01?

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 and Primary Care Trusts. The depreciation element is retained by the NHS trust to help fund 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 an 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 DEL's 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 Hospital and Community Health Services capital prioritisation

Could the Department list the criteria used by the Capital Prioritisation Advisory Group in its assessment of which projects to prioritise for major investment? Which schemes were assessed last year, and which were prioritised for investment? Of these, which have been allocated public and private funding? Could the Department give examples of schemes which have been turned down, and explain why?

1. Schemes are prioritised on the basis of health service need. CPAG is responsible for developing the criteria against which this is assessed, and reporting to Ministers on each scheme against these criteria. The criteria used to assess health service need are:

— For better access to services

— For improved clinical quality of services

— For improved environmental quality of services

— For development of existing services and/or provision of new services

— For improved strategic fit of services

— To meet national, regional and local policy imperatives

— To meet training, teaching and research needs

— To make effective use of resources

2. CPAG assesses schemes on the basis of information contained in a document known as the Strategic Outline Case (SOC). The SOC document is written jointly by the Regional Office and the relevant health authority and NHS trusts. As part of the assessment each site with a proposed scheme is visited by a member of CPAG.

3. 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.

4. The following list shows the 29 schemes put forward to CPAG in the latest round of prioritisation, the outcome of which was announced in February 2001. Ministers decided to give the go-ahead to all 29 schemes; none were turned down.

4.8 Long Term Capital Projects and PFI

4.8a Could the Department provide a table showing all publicly funded capital projects with a total cost above £10 million which are under construction during 2001-02? 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?

4.8b Could the Department provide details of PFI projects with a capital value of £10 million or over approved since 1992, including their current status?

4.8c 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 £10m plus an aggregate of those below £10 million, since 1997-98? 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?

4.8d 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 initial costs of PFI schemes at outline business case (baseline year) for those schemes reported in last year's questionnaire and comment on increases?

4.8e 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 of the Departmental Report table showing the source and applications of HCHS capital, giving the outturn position for 2000-01?

4.8f 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.

4.8g Could the Department update the information given in Table 4.8g on donated capital additions by region only?

4.8h Could the Department list, by scheme, how much has been spent on developing business cases for a sample of schemes worth over £1 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?

4.8i Could the Department detail for every NHS trust with a hospital development, whether publicly or privately financed, worth over £25 million (i) the number of NHS beds—general and acute—currently provided by the trust and (ii) the number of NHS beds—general and acute—to be provided when the development is completed?

4.8j 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?

4.8k 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?

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?

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 2001-02.

Table 4.8.1

PUBLICLY FUNDED CAPITAL PROJECTS WITH A TOTAL COST OVER £10 MILLION WHICH ARE UNDER CONSTRUCTION DURING 2001-2002

Notes

1. Publicly-funded element of main PFI scheme.

2. Due to extended Briefing of major Pharmacy package.

3. Anticipated FBC.

4. This excludes the Bradwell developments which are awaiting a decision on the Elderly Care Strategy for North Staffordshire.

5. Assumes EEC negotiated exemption on tendering.

6. Anticipated to Start in 2001-02.

7. Outline Business Case not yet approved by Trent Regional Office.

8. Full Business Case not yet approved by Trent Regional Office.

COMMENTARY FOR PROJECTS WITH SIGNIFICANT DISCREPANCIES BETWEEN ORIGINAL AND CURRENT ESTIMATE INFORMATION.

Newcastle Strategic Review (NSR)—Enabling Schemes

2. This scheme consists of fifteen various work packages. The largest single package, which constitutes 43 per cent of the total cost, is for the provision of a major Pharmacy at the Royal Victoria Infirmary site. An extended briefing process for the Pharmacy package has caused a delay in the overall programme.

Bath Redevelopment.

3. The delay to the programme is due to an expansion in the scheme to take advantage of the Accident and Emergency modernisation fund. (The remaining stage of this redevelopment scheme is principally A&E.) This has had the effect of extending the boundaries of the original brief. As a result the scheme will need to be undertaken in phases causing the delay in programme.

Edgware Community Hospital

4. The time overrun reported is in the planning/design stage as the project is currently being prepared for tender. The design team had been asked to review costs to ensure that the project can be delivered within budget. The additional cost of 8.8 per cent against FBC has been identified as part of this process and has been approved by the Capital Review Group.

5. The current timetable indicates a start on site during October 2001 and completion at the end of 2003.

Guy's and St Thomas's

6. The Rationalisation of Services over the Guy's site and the St Thomas' site is partly publicly funded and partly funded by Guy's and St Thomas' Charitable Foundation, the £50m cost identified in the table being the public element. As a result of an injection of further charitable funding, the originally envisaged cancer services have been significantly improved. The scheme is currently in the process of redesign, and this has led to the delay.

4.8b Could the Department provide details of PFI projects with a capital value of £10 million or over approved since 1992, including their current status?

7. All projects with a capital value of £10m or over are shown on the tables in answer to 4.8c.

4.8c 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 £10m plus an aggregate of those below £10m, since 1997-98? 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?

The response to the first question is provided in the attached tables. The second two questions regarding revenue support for schemes are answered after the tables.



© Parliamentary copyright 2002	Prepared 17 January 2002