Creative accounting with public money

NHS budgets come in three parts:

• Department’s fixed resource budgets (Resource DEL)
• Department’s fixed capital Budget’s (Capital DEL) 
• Annually Managed Expenditure (AME) 

The Treasury say that Resource Departmental Expenditure Limit (DEL) is the basic expenditure, mostly on pay, but (for the NHS) it also includes things like the drug bill. Spending that cannot reasonably be subject to firm limits, or that relates to certain non-cash transactions, is called the AME. The Capital DEL includes the acquisition of assets such as land, buildings and machinery and capital grants.


For comparison, here are the figures for 2010/2011 for NHS England

Resource DEL £98.7bn
Capital DEL £5.1bn
Resource AME £-2.0bn

The Spending Review gives the following figures for Capital DEL. The government decided to transfer part of the Capital DEL to local authorities to pay for social care (PSS - Personal Social Services grant).

	2010/11	2011/12	2012/13	2013/14	2014/15
Capital DEL	£5.1bn	£4.4bn	£4.4bn	£4.4bn	£4.6bn
Transfer to PSS	£0.0bn	£0.8bn	£0.0bn	£1.1bn	£1.0bn

So what is Capital DEL spent on? Well the best evidence I can find (I haven't searched far) is NHS Budgetary Information for 2006/07 and this suggests (Table 3.4) that the majority of the DEL is spent on hospitals and PCTs. This makes sense because hospitals have large capital projects like hospital buildings and expensive equipment like MRI and CT scanners; and PCTs also fund capital projects like community hospitals and clinics.

In July last year Andrew Lansley announced that FTs would no longer have access to public sector capital. The intention was to take FTs entirely off the public sector balance sheet. Lansley told FTs that if they need capital then they would have to borrow it at commercial rates from commercial lenders. So FTs do not have access to the NHS Capital DEL. Significantly, all hospitals have to be Foundation Trusts by April 2014. The Health Bill will abolish PCTs in April 2013, and since PCTs will not exist, PCTs will not use the Capital DEL after April 2013.

This produces an odd situation. There will be £3.6bn of NHS Capital DEL in 2014/15 (£4.6bn - £1.0bn to take into account the transfer to PSS) yet there will be nothing to spend it on.

Why did Osborne allocate money for a budget that will not be spent? Perhaps there is a clue in the fact that it will not be spent. The last government, in the Darling Budget of March 2010, said that they would reduce capital spending by one half by 2014/15, so under the last government the NHS Capital DEL would be £2.25bn in 2014/15 (compared to £4.5bn Darling budgeted for in 2010/11). Labour actually intended to spend this money. However, it looks mean compared to the £4.6bn that Osborne allocated in his 2010 Spending Review. Osborne actually only intended to spend £1.0bn of that money (the PSS transfer), but that would look mean compared to Labour's £2.25bn.

When it comes to who would cut more, it is important for Cameron to be seen to be spending more on the NHS than Labour would. The phantom Capital DEL makes Cameron look generous because it looks like he would be spending more than twice than Labour, when in actual fact the Conservative government will be spending less than a half. Creative accounting with public money.