5. Before 1991 hospitals did not pay a charge for capital. Do you believe that this was a better system of funding and if so why?
Again, if the principle is fairness of funding and delivery and efficiency through risk pooling, then imposing capital charges-which simply devolve the risks and costs of capital to small areas and local people-is not a good system (BMJ 2000). It is based on the false premise that local managers have control over their cost base. It has also created major problems of affordability at local level and created inequities in endowing some trusts with generous estate and dowries at the expense of others. Capital receipts, for example, are retained by local foundation trusts although the original capital and investment came from public subscription. This places some at an unfair advantage and can distort planning. Take, for example, UCLH, where the cost of the investment rose more than three-fold during the preferred bidder phase. On achieving foundation trust status, the trust was able to reinvest the £140 million released from the sale of the Middlesex Hospital for a new cancer centre. In around 2003, it also received a £200 million dowry from Blair when the government bought the National Heart Hospital and gave it to UCLH. So, UCLH has gained several times over-but at the expense of other services and trusts in London. Previously capital receipts would have been returned to the centre so that no area had the advantage of a historical legacy or ad hoc privileges.
Given that money is raised from general taxation on the basis of ability to pay, the idea that some trusts and areas should have more generous estate or higher capital charges than others does not make sense. Whether it is a blessing or a curse depends upon local circumstances; but it is not equitable and it distorts resource allocation and planning.