Annex A > Chapter 6 - Funding and Resources > UBHT's funding after 1991 > Capital funding after 1991

Capital funding after 1991

53 From 1 April 1991 the NHS introduced a system of charging for the use of capital assets owned by self-financing trusts. Such assets were transferred into the ownership of trusts on their establishment. Interest on the value of the assets was payable to the DoH. [76] In turn, a capital charge was included in the charges made by providers to purchasers. This charge was intended to cover interest payments, depreciation and the repayment of loans. In 1991/92, the aim of launching the NHS `internal market' in a `steady state' meant that capital charges were:

`... introduced so as to have no impact: charges were estimated by providers and allocated by purchasers according to existing use.' [77]

Previously, capital to fund the replacement or development of equipment or buildings had been sought from either the major capital programme (managed by the RHA) or from the DHA's own capital programme. The UBHT's Budget statement commented:

`Capital was always seen as "free" and the more that could be obtained and used the better'. [78]

54 Trusts were required to determine the need for capital against a five-year rolling programme of capital investment. [79] The capital programme for trusts was controlled by the DoH through the setting of an External Financing Limit (EFL). [80] The UBHT's capital programme and EFL is shown at Table 4 below.

Table 4: United Bristol Healthcare NHS Trust capital programme (cash value at the year indicated)

Year	Capital £'000	External Financing Limit £'000
1991/92	8, 993	-1, 161
1992/93	8, 048	2, 622
1993/94	7, 304	-670
1994/95	10, 761	2, 486

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Footnotes

[76] UBHT 0338 0013; UBHT Budget. See also HOME 0003 0084; `Working for Patients: Capital Charges: Working Paper No 5' (DoH, 1989) and HOME 0003 0028; `Working for Patients: Self-Governing Hospital Trust: Working Paper 1' (DoH, 1989)

[77] INQ 0047 0028; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol'. See Annex B, and see further INQ 0047 0027 - 0029 ; `National and Regional Resource Allocation Frameworks and Funding Availability for Acute Sector Health Services at Bristol' . See Annex B

[78] UBHT 0338 0013; UBHT Budget

[79] UBHT 0338 0013; UBHT Budget

[80] An EFL was, in effect, a cash limit on the net external financing of an NHS trust. NHS trusts had a financial duty to meet (or come within agreed limits of) the EFL. The EFL was calculated as the difference between agreed capital spending and internally generated resources. A positive EFL meant that the NHS trust could have access to public dividend capital to help finance capital expenditure. A negative EFL meant that the NHS trust had sufficient internal resources. The EFL was set after taking into account: `The projected capital charges for the year; the interest chargeable on the opening balances; ... the estimated depreciation charges [for the financial year in question]; an estimated ... capital dividend set to `claw back' the difference between the interest funded through prices and the actual interest payable for the [previous financial year]; minor expected variations in working capital; [and] the centrally approved capital programme.' UBHT 0338 0139; UBHT Budget