[A-List] UK state: Treasury rules

["Michael Keaney" <michael.keaney@xxxxxx>]

Traditionally the Labour Party argued that state funding was necessary for
infrastructure that would otherwise not be paid for by the private sector.
Now Gordon Brown, self-styled "soul of the Labour Party", explains that
state coffers are to be opened only for those projects where there IS
private sector funding. Much as the private sector normally likes this sort
of arrangement, the expense involved in transport and health systems
necessitates the sort of policies that Labour once advocated. Such is the
cul-de-sac into which the manically PPP-supporting Brown has led himself. No
wonder Tony is looking more fondly at Livingstone these days -- Ken is going
to provide excellent ammunition with which to see off Gordon's challenge for
the premiership.

------

£10bn Crossrail faces axe

Treasury set to block plan for new train links in London as private
investors refuse to get involved

Kevin Maguire
Monday October 27, 2003
The Guardian

Senior Treasury officials are preparing to block Crossrail, the ambitious
£10bn scheme to improve public transport links in London, because private
investors are refusing to get involved.

The officials have privately conceded that the government is unlikely to
approve the plan to construct new train links across the capital.

The admission is a blow to the consortium and big businesses championing a
project which includes a new tunnel between Paddington station in the west
and Liverpool Street in the east.

Although the Treasury and transport department remain committed in public to
Crossrail, the serious doubts expressed in private suggest it will never
leave the drawing board.

A Treasury source involved in the discussions said Crossrail had failed to
produce a viable commercial plan and accused private firms of failing to
give firm commitments by guaranteeing investment.

"Crossrail will not go ahead unless the private sector comes up with most of
the investment and there is no sign of that happening," said the Treasury
official.
Supporters of the scheme last night accused the chancellor, Gordon Brown, of
plotting to scupper the link.

A private sector backer said the "shadow boxing" between Whitehall and
business leaders would undermine confidence and make it harder to secure the
commitments demanded by the government.

"The Treasury is using this as an excuse. They are desperate to find a way
out of it somehow but don't want to take the political rap," said the
private sector supporter.

"They are making the private sector the scapegoat. The Treasury only seems
to look at the cost, they don't seem to look at the benefit."

Crossrail is a key component of London mayor Ken Livingstone's efforts to
get the gridlocked capital moving again.

As well as the east-west tunnel, improving routes into Essex and Kent as
well as across London, a second phase would enhance lines from north-east
London to Richmond, Kingston and Heathrow in the south-west.

Formed as a joint venture between the Strategic Rail Authority and Transport
for London after it was shelved by the Tories in the early 1990s, the
government has allocated £154m to feasibility studies.

The Treasury believes virtually all of the £10bn cost should be met by the
private sector rather than a much smaller £3bn contribution initially
floated by those behind the project.

The Treasury's hard line is creating some tensions with the transport
secretary, Alistair Darling, who is wary of committing further huge sums to
a rail network with a poor record.

The spiralling cost of the west coast mainline modernisation and bottomless
pit that became Railtrack, replaced by Network Rail last year, has left Mr
Darling cautious.

Announcing government support in principle last July, Mr Darling said
Crossrail would happen only if there was a "very substantial contribution"
from private industry though he declined to give a figure.

The private sector is also concerned about the financial benefit from
investing large sums in rail, with maintenance companies threatening legal
action following Network Rail's decision last Friday to cancel contracts
over rising costs and poor performance.

A government-appointed review headed by Adrian Montague, deputy chairman of
Network Rail and a former head of the Treasury's private finance task force,
is exploring all the options on Crossrail before advising ministers whether
or not to proceed.

-----

 Inquiry into NHS 'subsidy' for private patients

John Carvel, social affairs editor
Monday October 27, 2003
The Guardian

Parliament's spending watchdog is investigating allegations that NHS
hospitals are losing millions of pounds to subsidise the treatment of
private patients, the Guardian has learned.

The National Audit Office has asked all NHS trusts with private beds to
provide information to show how far they are sticking to rigorous accounting
rules that prevents the health service losing money by carrying out private
practice.

It started the inquiry after the former health secretary, Frank Dobson,
unearthed evidence showing that University College London Hospitals (UCLH)
NHS trust had unpaid debts in March of more than £4.3m. Its annual turnover
from private patients was £13.4m in the 2001/2, the latest year for which
accounts are available.

The trust, under chief executive Robert Naylor, is one of the leading
candidates to be in the first wave of foundation hospitals and it is bidding
to use spare capacity in its cardiac units to treat the entire waiting list
for routine heart surgery in England within the next 12 months.

Across England, NHS hospitals earn more than £300m a year from treating
about 120,000 private patients resident in the UK. But although ministers
tell trusts to make a profit from this work, they do not collect financial
information to check whether they are doing so.

Mr Dobson said: "This hospital has unrecovered debt worth more than £4m on a
private turnover worth £13.4m. It is difficult to see how it can make a
profit on such figures as the regulations insist it must do.

"If the NAO reveals losses from private patients to be typical across the
NHS, it must cast doubt on the government's plans to give greater financial
flexibility to some of these hospitals.

"UCLH is clearly incapable of collecting money from the private sector. On
NHS work, Mr Naylor has shown himself a good chief executive, but these
dealings with the private sector are not a good foundation from which to
launch his bid to become a foundation trust."

After questions from Mr Dobson, Mr Naylor sent accounts showing £422,000 of
debt outstanding between two and five years, £799,000 between one and two
years, and £505,000 between six and 12 months.

Although Mr Naylor said UCLH aimed to make a profit of 20% from its private
patients, he acknowledged it was "not possible to calculate the accurate
expenditure on the treatment of private patients because they are treated in
areas alongside NHS patients".

He said the unpaid debt included £922,000 owed by overseas visitors from
countries without a reciprocal agreement with the NHS. "These cases often
start with emergency admission of an individual who does not hold health
insurance. For obvious reasons we frequently fail to recover these costs and
a significant proportion are eventually written off."

Other problems included slow payment by private medical insurers and Middle
East embassies, which from time to time had to be threatened with withdrawal
of services "to encourage them to pay".

The Department of Health said: "The NHS can only treat private patients if
that doesn't interfere with care of NHS patients. Income generated has to be
ploughed back into NHS services so that patients benefit.

"It is up to individual trusts to achieve that. If they have problems with
outstanding or bad debt, they must deal with them. We say the trusts should
maintain accounts to show that all costs incurred in the treatment of
private patients have been recovered plus a contribution to cover their
capital."

UCLH said the money owed by private patients in March was £4.386m. "We don't
consider this to be bad debt, just outstanding," a spokesman said.

"About a quarter is owed by foreign patients not entitled to free treatment
on the NHS, but requiring emergency health care. All NHS trusts have
difficulty retrieving this money.

"The overwhelming majority of the remaining debt has only been outstanding
for up to six months. This is normal when dealing with insurance companies,
which pay for most private practice treatment.

"The policy of the trust is only to undertake private treatment when there
is reasonable certainty of achieving profit. The prices we charge build in a
profit margin of 20%, which subsidises NHS costs. The generation of private
income is not a priority for the trust."