Joining the dots
In October, the Commons public accounts committee heard evidence from the Department of Health’s director-general of finance, David Williams, and its permanent secretary Sir Chris Wormald.
In the course of the hearing, the committee discussed the issue of capital budgets being pilfered to support the department’s revenue budget. “We have highlighted before the capital budget moving to support day-to-day spending,” said committee chair Meg Hillier. She added that the King’s Fund had told the MPs that the cost of the backlog of high-risk maintenance work increased from £458m in 2014-15, when the committee began to highlight the issue, to £947.1m last year.
Williams, in response, confirmed that the department transferred £1.2bn from capital to revenue in 2016-17, which he described as “the high watermark”, adding that the department aims to “remove that switch entirely by 2021”.
This worried Hillier. “Have you done an analysis of what the impact is of that lack of capital funding – the money that is being taken out – and what backlog there is going to be in order to fill the hole that is being created in order to create resources?” she asked.
Williams’ answer was “not specifically”, which hardly worked to build confidence from Hillier and her fellow MPs.
Indeed, in the wake of the session, Hillier has now written to Sir Chris saying: “We remain concerned about the lack of clarity about the long term impact on the healthcare system’s asset base from the ongoing use of capital budgets to support day-to-day spending.”
There is, of course, one way to ring-fence certain elements of revenue budgets, and its name is PFI (or PF2).
Unfortunately, nowhere in the discussion at the public accounts committee meeting was PFI, PF2 or PPP mentioned.
While clearly the model would not solve all of the department’s problems, it does seem slightly odd that a model designed specifically with the aim of preventing governments pilfering maintenance budgets in times of economic restraint was not discussed at all – not even to consider whether there are any examples of the model successfully achieving this.
It is, perhaps, a sign of the toxicity with which the private finance concept is now associated that even in an area where it has had a positive impact, it cannot be considered as part of the solution.
Hillier recently criticised offshore funds that own many PFI deals, arguing that this is not how the model was envisaged.
But as evidence from her own committee seems to cry out, there needs to be some sort of rapprochement with a long-term privately financed model that can provide not only the upfront investment that gets new projects off the ground, but also ensures that the budgets will still be there to maintain that property in 20 or 30 years’ time.