Health and Social Care (Community Health and Standards) Bill

Part of the debate – in the House of Lords at 10:15 pm on 13 October 2003.

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Photo of Lord Warner Lord Warner Parliamentary Under-Secretary, Department of Health, Parliamentary Under-Secretary (Department of Health) 10:15, 13 October 2003

Public dividend capital represents the Department of Health's equity interest in defined public assets across the NHS. It constitutes an asset of the Consolidated Fund. The department is required to make a return on its net assets, including the assets of NHS trusts, of 3.5 per cent. For NHS trusts, that takes the form of a variable charge—a public dividend capital dividend—paid twice yearly. That payment represents—I emphasise the word—a notional cost of servicing, but not repaying, debt. Effectively, it is an interest rate of 3.5 per cent, which includes a premium on the costs to Her Majesty's Treasury, but it is less than might be payable in a commercial environment.

Repayments of public dividend capital are made only when the trust has surplus cash; for example, land sales proceeds not spent on new capital assets. The PDC of an NHS trust applicant for NHS foundation trust status, immediately before authorisation is granted, will continue as PDC under the same conditions for the NHS foundation trust. NHS foundation trusts will pay public dividend capital dividends on exactly the same terms as NHS trusts, so there would be no significant change.

Amendment No. 158 is perhaps misguided. Cancellation of PDC is subject already to Treasury and parliamentary approval. The Treasury prepares a Treasury minute which it must put before Parliament, so the Secretary of State could not simply write off the PDC of an NHS trust or an NHS foundation trust. The amendment is therefore unnecessary. In any case, cancellation of PDC, as opposed to repayment, usually occurs only on the dissolution of an NHS trust, in which case, the cancellation of the PDC is matched by cancellation of the net asset reserves in the dissolving trust's books. Under Clause 7(5), on becoming an NHS foundation trust, the body corporate, which was an NHS trust, is not dissolved, but continues, albeit under a different name and with a different status. The applicant's property rights and liabilities, including PDC, continue with the new body.

I turn to Amendment No. 159. PDC is not a government asset, so it is entirely appropriate that the Secretary of State should, with the consent of the Treasury, determine the terms of NHS foundation trusts' PDC, just as it does now with NHS trusts. In addition, the Secretary of State must consult the independent regulator before setting the terms under which PDC is issued to an NHS foundation trust. That is the system that is in place. It is in no way as sinister as some noble Lords may suggest.