6. 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?
At first sight, the use of a charge would seem to be better.
As a Scottish Government website states; "Capital charges in the NHS were first introduced on 1 April 1991, subsequent to the White Paper 'Working for Patients'. The objectives of capital charging are to promote an awareness of the true cost of capital; improve decision-making on asset acquisition and disposal; promote an efficient use of assets; and recognise the cost of capital" (June 2003, accessed in November 2009).
If these objectives are achieved, then so much the better.
However it appears that capital charges have not been used through the tiers of NHS management according to an article in Accountancy Age 2007, as follows:
"The capital charges from the ownership of fixed assets were not devolved to the managers responsible for employing the assets, leaving them as 'free goods' at the point of use. Diffusion had not taken place to any extent and only a minority of trusts thought that budgetary control over assets had improved.
The reforms were negatively perceived and had not been assimilated into the culture of the organisation. Evidence of a loose-coupled organisation was found, with numerous information sources used to make asset acquisition and disposal decisions. Limited use was made of capital accounting information in external reports".
This lack of use through the tiers of management raise suspicions about the motives behind the imposition of capital charges (see Pollock and Gaffney 1998).