The biggest ever NHS hospital-building programme is under way, according to the government. Building is to start on 18 hospitals worth £2.3bn over the next two years, adding to the 38 major schemes already given the green light.
But, unlike traditional NHS hospital-building schemes, most of the capital cost will come from commercial money through the private finance initiative (PFI) rather than from public funds. Under the PFI, private-sector companies build and finance hospitals and run non-clinical services, such as portering and catering, in return for regular "rental" payments from NHS "tenants".
The PFI has undoubtedly transformed the NHS stock of capital assets in a way that public capital has not done in the past. The government claims it offers better value for money by harnessing private-sector innovation and transferring risks, such as cost overruns, that have blighted publicly funded schemes. But critics claim it represents creeping privatisation of the NHS, leads to a reduction in bed numbers, and is more expensive than public funding.
This year NHS public capital resources in England amount to £2.6bn. (A capital asset is any physical entity that will be used for more than a year and costs £5,000 or more. Funding for all these assets, big or small, is separate from revenue funding for doctors, nurses, drugs, bandages or other consumables.)
Some £1.1bn in capital funding is distributed to the eight English NHS regional offices. Just over half of this is handed out to NHS trusts for their general capital expenditure needs, including maintenance and new equipment. Trusts can bid for a slice of the rest of the regional capital pot for projects they can't afford out of their block allocation.
Other capital expenditure is more targeted. This year £168m has been earmarked for projects that support central priorities such as reducing waiting lists and times, improving renal (kidney) services and updating equipment used to diagnose cancer.
The Treasury's capital modernisation fund, set up to support innovative capital investment projects, will provide a further £122m this year. This is being targeted at the modernisation of accident and emergency units and the opening of new "walk-in" health centres.
But demands on these public resources are high. It would take £3.1bn just to clear the service's backlog of building and equipment maintenance. Funding is spread thinly, making major non-PFI projects few and far between. Just four major hospital schemes have been approved since 1997 for direct funding through the public purse.
