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Editor—Pollock has presented a one sided view and explanation of some of the policy actions she suggests may drive the NHS towards a US-style health care system.1 Her view is that, as a result of a combination of historic and current policy changes, NHS trusts will be burdened with such large debts that they will be forced to embark on several actions that will raise “the spectre of US-style health maintenance organisations.”
But her initial premise (of rising cost pressures) is a bit wobbly.
Firstly, although capital charges do indeed represent a cost to trusts in the NHS, these are not new. Introduced as part of the internal market, they were matched on the purchasing side so that the net sum across the NHS was zero.
Over time, the direct link between an individual trust's charge and the compensating money given to its purchasers has been broken. Providers have had to think more carefully about their use of capital. Overall, this is a good thing as capital, like labour, is not a free good in the NHS: its cost can be measured in the forgone benefits of using resources in some alternative way.
Secondly, the repayments that trusts have to make on any private finance initiative or public-private partnership deal are, again, as Pollock points out, also a cost, but one that is also recovered from purchasers. Just as publicly funded capital schemes are paid for from the Exchequer, so private finance initiative schemes are ultimately paid for by the Exchequer (out of taxation), but the route is different (via purchasers' allocations rather than a direct (repayable) grant from the Exchequer).2
Thirdly, although the repayments overall will escalate over the coming years, this is simply because the government is keen to see more deals struck under the initiative.
Having apparently established that trusts will be facing a mounting bill for capital, Pollock then states that unless more money is injected into the NHS to help meet these costs, patient and clinical services will be under threat, or other unpleasant actions will have to be taken that will destroy the NHS as we know it.
But, of course, more money has been allocated to the NHS. And part of this pays for private finance initiative costs and will flow from purchasers to providers with private finance initiative and public-private partnership deals, and on to private consortiums (which paid for and built NHS facilities). If these schemes had been funded via the conventional public route then some of the settlement would have been used in this way instead. Either way, it could be interpreted (as Pollock has done) as threatening patient services (although I would have thought that hospitals and other facilities are generally seen by most people as an integral part of patient services).
There are legitimate arguments against the private finance initiative and public-private partnership, but in this paper Pollock fails to articulate them.
References
1.Pollock AM. Will primary care trusts lead to US-style health care? BMJ. 2001;322:964–967. doi: 10.1136/bmj.322.7292.964. . (21 April.) [DOI] [PMC free article] [PubMed] [Google Scholar]
2.Sussex J. The economics of the private finance initiative in the NHS. London: Office of Health Economics; 2001. [Google Scholar]
Editor—Contrary to Appleby's assertion, the introduction of capital charges on NHS trusts in the 1990s has had strongly negative effects on trust assets and trust finances.
Table.
Mean required and actual capital charges per NHS trust (£000). Values are for all NHS acute care trusts in England, 1992-8 inclusive
Source: Fitzhugh Directory of NHS Trusts. *6% on capital value plus depreciation. †Surplus (to pay interest and dividends) plus depreciation.
Aggregated financial accounts of NHS acute hospital trusts in England for 1992-8 inclusive show that trusts as a whole failed to make the 6% target rate of return in all years except 1992 and 1995 (table). Even then, many trusts were unable to break even after paying interest. The cost of capital charges to the NHS as a whole might have been zero; but their average cost to each NHS acute hospital trust in 1998 (the first year when the government collected the full 6%) was £393 000. In fact, the situation was so parlous that the Department of Health decided not to collect the full 6% until 1998.
Capital charges deterred trusts from undertaking what the Department of Health regarded as a reasonable amount of expenditure for capital goods. In the first three years of their operation, NHS acute hospital trusts in England underspent on their capital budget by an average of £200 000 a year.1-1 Between 1993 and 1997 NHS backlog maintenance costs rose from £2.4bn to £3.1bn.1-2 Capital charges have had a strongly negative impact on the capital base of the NHS (and especially on planned capital expenditure). The loss of capacity has been regretted in the report of the national beds inquiry and in the NHS plan.1-3,1-4
The comprehensive spending review allows for average annual real term increases of 6.1% in NHS funding in the United Kingdom over the four years to 2003-4. Many trusts report annual cost pressures of 6% just to maintain current service levels. Moreover, the annual cost of capital to hospitals built under the private finance initiative has risen from an average of 9% to up to 20% of their revenue budgets. Average bed losses were 30% in the first 11 such hospital schemes, and reductions in clinical budgets were up to 20%.1-5 A full list of publications relating to the private finance initiative is at www.ucl.ac.uk/spp/about/health.htm
Footnotes
A longer version of this letter is published on bmj.com
References
1-1.Shaoul J. NHS trusts: a capital way of operating. Manchester: Manchester University; 1996. . (Working paper.) [Google Scholar]
1-2.Department of Health. The government's expenditure plans–1998-1999. London: Stationery Office; 1998. . (Cm 3912.) [Google Scholar]
1-3.Department of Health. National beds enquiry. London: DoH; 2000. [Google Scholar]
1-4.Department of Health. The NHS plan. London: DoH; 2000. [Google Scholar]
1-5.Pollock AM, Dunnigan MG, Gaffney D, Price D, Shaoul J. Planning the “new” NHS: downsizing for the 21st century. BMJ. 1999;319:179–184. doi: 10.1136/bmj.319.7203.179. [DOI] [PMC free article] [PubMed] [Google Scholar]
