Private Finance Initiative (Hansard, 22 November 2001)

§ Mr. Bercow
To ask the Secretary of State for Health (1) if he will make a statement on the expected saving to public funds from the private finance initiative schemes in(a) Carlisle, (b) Dartford and Gravesham and (c) South Buckinghamshire; [15256]
(2) what the anticipated saving is to public funds from the 100 PFI hospital schemes provided for in the NHS plan by 2010; [15247]
(3) if he will make a statement on the anticipated savings to public funds from the private finance initiative schemes due to become operational in 2001. [15257]

§ Mr. Hutton
The table shows a list of all major private finance initiative contracts which have reached financial close since May 1997 listing net present costs of private finance versus public sector comparator option. The projected savings on each scheme over the lifetime of the contracts are in column 4 and are presented in net present value terms.
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Net present costs of private finance initiatives versus public sector comparator option

NHS Trust PFI (£000) Public (£000) Savings in net present value terms (£000) Difference (Percentage)

St. George's Hospitals 565,565 565,768 203 0.04

King's Healthcare 2,952,700 2,959,800 7,100 0.24

West Berkshire Priority Care 273,245 282,228 8,983 3.18

Leeds Community and Mental Health Services² 420,800 431,700 10,900 2.52

Total projected savings — — 223,000,000 —

¹ At financial close in July 1997 the figures for the PSC and PFI were 922,600 and 943,900 respectively, producing a projected saving of £21,300.000. An error in the PSC was uncovered by the NAO during the course of the work for their report on this scheme in 1999. As a result the projected saving was revised downwards to £5.1 million.

² Figures only taken as at FBC

Notes:
The table does not allow direct comparisons between the difference schemes. Investment appraisal conventions allow different approaches to counting costs. For example, provided the conventions are consistently applied in each appraisal, costs common to both alternatives can be either included or excluded and differences in costs can be scored rather than actual costs.
The table includes the expected savings on the schemes at Carlisle, Dartford and Gravesham and South Buckinghamshire. Greenwich, North Durham, Calderdale, South Manchester and Norfolk and Norwich all became operational in 2001. No further major schemes are scheduled to open in 2001.
The 23 major schemes in the table contribute to the target of over 100 new PFI hospital schemes by 2010 in the NHS plan. The target comprises a minimum of 64 major hospital schemes (capital value over £20 million) and a minimum of 36 medium-sized hospital schemes (capital value £10–£20 million), of which 17 have already reached financial close. Information on the projected savings of medium-sized hospital schemes is not held centrally.
Value for money in PFI is assessed on a case by case basis upon presentation of the full business case (FBC). None of the other 60 major and medium-sized hospital schemes comprising the NHS plan target have yet to reach this stage so it is not possible to anticipate the savings to public funds for these schemes.
The total projected savings in net present value terms to the national health service and the taxpayer for these first 23 major PFI schemes to reach financial close is £223,000,000.

§ Andrew George
To ask the Secretary of State for Health (1) what guidance he has issued to those hospital trusts making strategic outhouse case bids for PFIs; and what scoring criteria will be used to measure(a) value for money, (b) existing social need, (c) existing medical service shortfalls, (d) innovation and (e) other factors; [15863]
(2) which initial PFI offers to acute trusts made in the last three years were (a) in response to a comprehensive and costed strategic outline case or plan and (b) following a general plan; [15849]
(3) which acute trusts have indicated an intention to complete a strategic outline cost for a PFI investment in the current year; [15848]
(4) how many PH offers have been agreed between his Department and acute trusts in each of the last three years. [15850]

§ Mr. Hutton
The most recent guidance for the preparation of strategic outline cases (SOCs) was issued to the national health service last year. The purpose416W of the SOC is to provide Ministers (advised by the Capital Prioritisation Advisory Group (CPAG)) with the necessary information to assess the national priority of major capital investment schemes with a capital value of £20 million or over.
The guidance states that Ministers have made it clear that the main criterion by which schemes are prioritised is health service need, but that other factors such as deliverability and affordability are also important.
Under the private finance initiative procurement process, initial offers by bidders are made in response to the invitation to negotiate which an NHS trust sends to bidders selected from those who responded to the Official Journal of the European Community notice. All major schemes which are prioritised on the basis of the SOC then have to prepare an outline business case (OBC) which identifies and develops a fully costed preferred option for the proposed scheme. It is at this OBC stage that the final decision is taken on whether to test for private finance; the assessment will take into account a number of value for money factors. If approved to proceed under the PFI route, the NHS trust will first place a contract notice in OJEC which potential bidders will respond to.
The decision to develop an SOC must be supported and agreed to by all the key local stakeholders, principally the Department of Health regional office, health authorities and primary care trusts. Local authorities and regional offices of Government/Department for Transport, Local Government and the Regions will also need to be aware if major construction works are envisaged. Only following such agreement will the Department of Health be formally notified and a decision taken on the best way of taking it forward. No such notifications have been received to date in the current year.
SOCs for major capital projects are normally accepted in specific rounds by CPAG, which advises Ministers on each scheme's viability. Ministers can consider cases outside of specific prioritisation rounds where there is an urgent need. The eventual treatment of such cases will depend on the progress and priority of those schemes already approved to commence their procurements, and the number of schemes waiting to go to tender, so as to ensure optimal value for money.
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The following major acute PFI schemes have reached financial close (signed contracts) and started construction in the past three years:
1999:

Hereford

Worcester

Barnet and Chase Farm

Swindon and Marlborough

King's Healthcare

South Tees

South Durham

2000:

Hull and East Yorkshire

St George's

University College London Hospital

2001:

West Middlesex

Dudley.

Net present costs of private finance initiatives versus public sector comparator option
NHS Trust	PFI (£000)	Public (£000)	Savings in net present value terms (£000)	Difference (Percentage)
St. George's Hospitals	565,565	565,768	203	0.04
King's Healthcare	2,952,700	2,959,800	7,100	0.24
West Berkshire Priority Care	273,245	282,228	8,983	3.18
Leeds Community and Mental Health Services²	420,800	431,700	10,900	2.52
Total projected savings	—	—	223,000,000	—
¹ At financial close in July 1997 the figures for the PSC and PFI were 922,600 and 943,900 respectively, producing a projected saving of £21,300.000. An error in the PSC was uncovered by the NAO during the course of the work for their report on this scheme in 1999. As a result the projected saving was revised downwards to £5.1 million.
² Figures only taken as at FBC