Written Evidence HM Treasury
QUESTIONS RAISED
BY IAN
SWALES MP
Q138. "In March this year, a new hospital
was announced for the area between Stockton and Hartlepool, costing
£460 million. The Trust was told it would be funded
directly by the Department of Health. Does that make any
sense to you?"
Q139. "Why would a £460 million
hospital suddenly be funded by the Treasury, as opposed to PFI,
which I understood was the normal way of doing these things?"
Response
1. These questions refer to North Tees and Hartlepool
NHS Foundation Trust's plans to develop a single site hospital
at Wynyard Park, to replace both the existing University Hospital
of North Tees and the University Hospital of Hartlepool.
2. NHS foundation trusts have access to private sector
and public sector financing for capital projects, such as hospital
schemes. There is no normal way of financing such schemes. Private
Finance Initiatives are only approved if the trust is able to
demonstrate there is a clear value for money case compared with
a publicly procured alternative.
3. North Tees and Hartlepool NHS Foundation Trust's
outline business case for the scheme contained a projected capital
cost of £464 million with 93% of this value to be funded
through Public Dividend Capital, and the remainder through an
equity contribution from the developer.
4. Government approval for this scheme was initially
granted in March 2010. It was therefore considered as part of
the cross-Government review of spending decisions between 1 January
and the general election. When considered alongside similar schemes
at a similar stage of development, other schemes were considered
to be more urgent, and so Government approval for the North Tees
and Hartlepool NHS Foundation Trust's scheme was cancelled.
5. We understand that the trust is currently reappraising
the available options for this scheme, including the possible
use of the Private Finance Initiative (PFI). The trust has not
yet submitted an updated business case to the Government for approval.
RESPONSE
TO PAC QUESTION
- STEPHEN BARCLAY
MP AND RICHARD
BACON MP
Question
The question concerns the accountability, and on
how it is regulated, of passing PFI contracts to third parties.
Would there be checks on the third party as to whether they are
suitable to take on the PFI contract and are there any safeguards
should circumstances change for the worst? Lastly, what would
happen if the third party held on to the money?
Response
The Treasury's "Standardisation of PFI contracts-Version
4" (SoPC4)[1]
provides detailed guidance to Authorities when writing a PFI contract.
Section 18 (pp 124-127) of SoPC4 contains guidance
on change of ownership clauses in a PFI contract, indicating where
it may be appropriate to restrict ownership in a PFI contract
to address the specific concerns of an Authority. For example,
in the interest of national security in a defence project, or
where an authority wishes to prevent tobacco companies holding
shares in a school. The provisions within this section allow an
Authority to ensure that there are adequate restrictions on the
organisations that are able to hold shares in a PFI company.
Section 21 (pp 145-146) provides for Contractor Defaults
which lead to termination of the PFI Contract if not remedied.
One of the defaults is failure to comply with the change of ownership
provisions. If there is a transfer of shares in the Contractor
to an unsuitable third party and that unsuitable shareholder fails
to transfer its shares to a suitable third party the Authority
has the right to terminate the PFI Contract.
BREAKDOWN OF
EUROPEAN INVESTMENT
BANK LENDING
TO UK AND
COMPARABLE MEMBER
STATES
1. On 26 October 2010, at a hearing on the financing
of PFI projects during the credit crises and the Treasury response,
the Public Accounts Committee requested a note, (Stephen Barclay
Q57) on the relative share of EIB funding the UK receives relative
to other European countries with a similar shareholding (but with
particular reference to Spain and Italy).
2. Finance contracts signed by the EIB in the countries
holding the five largest shares of EIB capital, expressed as a
total amount and as a share of total EIB lending in the EU, are
set out in table 1.
Table 1.
| 2010*
| 2009 |
| Loan amount
(€m)
| % of
EU lending | Loan amount
(€m)
| % of
EU lending |
| UK | 4,687 | 10.0
| 5,411 | 7.7 |
| France | 3,791 | 8.1
| 6,290 | 8.9 |
| Germany | 5,690 | 12.1
| 9,802 | 13.9 |
| Italy | 4,404 | 9.4
| 9,687 | 13.7 |
| Spain | 7,967 | 17.0
| 10,494 | 14.9 |
Source: European Investment Bank, Annual Reports and EIB website.
* statistics for 2010 include all finance contracts signed
up to 10 November 2010, as published on the EIB website
3. The Committee should be aware that France, Germany, Italy and
the UK all have the same capital holding of €37.6 billion.
Spain has a capital holding of €22.6 billion.
4. The share of lending going to the UK should be considered in
the context of:
¾ UK projects
traditionally having access to and securing funding from capital
markets;
¾ local
authorities ability to obtain competitive financing from the Public
Works Loan Board and
¾ Limited
UK access to the EIB's convergence objective, given the relatively
limited number of convergence regions in the UK
November 2010
1 http://www.hm-treasury.gov.uk/d/pfi_sopc4pu101_210307.pdf?bcsi_scan_F8D0BFE83951C3DA=0&bcsi_scan_filename=pfi_sopc4pu101_210307.pdf
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