Changes in asset valuation in the UK health service

Abstract

Purpose

To help facilities managers understand the origins and aims of the National Health Service (NHS) asset valuation and capital charging system, of the depreciated replacement cost (DRC) approach to valuation, its strengths and weaknesses and how under devolution the Scottish Health Service is adapting DRC assumptions to meet multiple policy priorities.

Design/methodology/approach

This paper examines the history of the system since inception in 1989, as an accounting and FM tool, subsequent debates on problems arising from DRC valuation methodology and recent developments in the Scottish NHS.

Findings

The original aim of the capital charging system in 1989 was to adapt a primarily financial accounting system of asset registers to create a dynamic management system to inform facility managers of the opportunity cost of their assets, encourage them to sell obsolete assets and drive modernisation of the estate. In Scotland much modernisation has now occurred. Other issues have emerged to preoccupy managers such as sustainability, preservation in use of historic buildings and concern not to overburden health bodies with an inherited older estate with onerous charges.

Practical implications

The paper presents new historic material identifying trends in the health service and professional thinking. It continues the debate between FM and valuation professionals, central government clients and researchers. The debate has implications for other specialised public sector estates such as prisons, courts, roads and defence and specialised private sector estates valued on DRC.

Originality/value

The paper explains recent developments in the UK's NHS asset valuation methodology in Scotland, and the historic roots of the capital charging system.

Citation

Andrew, A. and Pitt, M. (2006), "Changes in asset valuation in the UK health service", Facilities, Vol. 24 No. 1/2, pp. 43-60. https://doi.org/10.1108/02632770610639198