Tag Archives: pfi

Another FOI response – the mystery of capital charges and council leases

Previously on this blog the investigation into car parking charges at Good Hope Hospital went off on a tangent when I discovered the hospital was apparently spending £100,000 per month on car park maintenance.

I’ve now received a response to my Freedom of Information request asking what they spend that on, and it raises more questions.

Firstly, their spreadsheet of costs shows that the lease paid to the council jumps from £3,000 in 06/07 to £250,000 the next two years, which is almost entirely responsible for the big jump in costs I talked about earlier in this investigation.

There’s also a half a million chunk on ‘capital charges’. I didn’t know what that was, but managed to find this piece from the British Medical Journal in 1998 explaining that it is a form of tax on NHS hospitals, “requiring NHS trusts to pay interest and dividends on their assets, and to recoup those costs through the prices charged to purchasers”. However, the article mentions that “on average NHS trusts are paying out 9% of their annual revenue income on capital charges.” The particular charges on Good Hope’s car parking figures represent closer to 50%, but I’m not sure whether that is unusual, or merely one way of contributing to the overall hospital’s charges (or how much capital charges have increased since 1998).

Capital charges are clearly a contentious issue in the running of the NHS, however, as the author explains:

“Previously the capital charge “returns” the Treasury received from NHS trusts (around £2.5bn a year) were passed to the Department of Health, which included them in health authorities’ revenue allocations for hospital and community health services.8 They then entered into payments to NHS trusts, which made returns to the Treasury, thus closing the circle. When NHS services are provided by the private sector, which does not pay capital charges to the Treasury, the funding leaves the system, reducing the annual circulating fund out of which other trusts must make their returns. Unless there is a concomitant increase inNHS revenue to offset this leakage—and so far there has not been—this will lead to the bizarre phenomenon of privately financed hospitals being funded through what is in effect a tax on hospitals in public ownership.”

It turns out the author is now known as an expert on PFI and has written what looks like a hugely useful book for anyone interested in the workings of the modern NHS. I’ll be buying that in the hope of some illumination.

Meanwhile, I’ve approached her directly for any insight she can provide, and have also received an offer of help from someone via Twitter.

If you’ve any other ideas, or want to join the investigation, let me know.