Hospitals 'struggling with NHS mortgage repayments'

Hospital PFIs use private money for building projects

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Paying off the "NHS mortgage" is putting so much pressure on the system in England that the future of some hospitals is at risk, ministers say.

The government said 22 trusts - running 60 units - are facing difficulties because of the cost of paying for privately-funded building projects.

The group represents nearly a fifth of the 100-plus PFI schemes in the NHS.

Problems are being encountered because, for some trusts, repayments account for up to a fifth of their budget.

PFI is a way of funding building projects using private money. It was originally introduced by the Tories under John Major, but the use of the scheme was largely expanded into the NHS by Labour.

Under the schemes set up in the health service, private firms pay to build hospitals, leaving the NHS to pay an annual fee or "mortgage" over 30 years or so.

Department of Health figures show yearly bills are forecast to rise by 75% to more than £2.5bn in the next 18 years, because of inflation and the way the deals are structured.

It means once the last scheme signed off by Labour is paid in full - in 2049 - more than £70bn will have been handed over.


On the face of it, annual PFI repayments of £1.57bn out of a £100bn-plus budget for the NHS may not seem too bad.

But when you look at the accounts of individual trusts, the figures are more dramatic.

For some the "mortgage" is accounting for between 10% and 20% of their turnover.

Faced with the prospect of several years of tight finances and rising PFI repayments, it is understandable why some parts of the NHS are worried.

However, in practice the pain may be felt elsewhere in the health service.

PFI deals are notoriously difficult to get out of and so in some places the response has been to channel patients away from non-PFI hospitals to PFI sites.

Services at those non-PFI sites then have to be scaled back. For those trusts that will seem unfair.

That figure also includes, in some cases, fees for services such as building maintenance, cleaning, catering and portering.

But even taking those services into account the sum far exceeds the value of the building projects, which stands at a combined £11.4bn.

Health Secretary Andrew Lansley said: "The truth is that some hospitals have been landed with PFI deals they simply cannot afford.

"Like the economy, Labour has brought some parts of the NHS to the brink of financial collapse."

But a Labour Party spokesman defended the deals, saying investment was needed "to replace the crumbling and unsafe buildings left behind after years of Tory neglect".

Health analysts have also said conventional hospital building projects could take decades to complete.

The Department of Health has said it will set out more details about its plans to resolve the problem later this year.

But sources close to Mr Lansley said if a solution was not found, money would have to be taken from elsewhere in the health service to "prop up" PFI hospitals.


There is a belief within some government circles that repayments could be reduced.

Professor John Appleby, chief economist at the King's Fund think-tank, believes renegotiation of the deals should be tried.

But he warned the NHS was not in a strong position because lenders feel confident the treasury will bail out trusts that get into financial difficulty.

"When these deals were negotiated there was more money flowing through the system and the NHS was probably a bit too optimistic about the future," he said.

NHS PFI deals in numbers

  • There are currently 103 PFI deals
  • The combined value of the projects is £11.4bn
  • The NHS will pay back more than £70bn on current projections
  • But that figure includes, in some cases, services such as building maintenance, cleaning and catering
  • For some of the larger schemes the services costs can account for half of the PFI fees
  • The annual bill is due to keep rising year-on-year for the next 18 years
  • After that contracts start coming to an end although the final payment will not be made until 2049

"Money is getting tighter now and there is a drive to keep patients out of hospital. It is causing problems."

Some trusts named by the Department of Health rejected the suggestion their future was at risk, while others argued if NHS funding kept pace with inflation they could meet the repayments.

Concern was also expressed that the reorganisation of the health service was complicating matters.

David Stout, of the NHS Confederation, which represents health managers, said: "We do need to look at how we remunerate hospitals for their care, and if a hospital has high costs the government I think is right, and we would support this, the government does need to look at how we ensure they get the right amount of money to run that care.

"We don't want the care to be closed simply because of the cost of PFI, that would be foolish."

  • The 22 NHS trusts that the government believes are at risk because of PFI are: St Helens and Knowsley; South London Healthcare; University Hospitals Coventry and Warwickshire; Wye Valley; Barking, Havering and Redbridge; Worcester; Oxford Radcliffe/Nuffield Orthopaedic Centre; Barts and the London; University Hospitals of North Staffordshire; Dartford and Gravesham; North Cumbria; Portsmouth; Buckinghamshire; West Middlesex; Mid Yorkshire; Walsall; North Middlesex; North Bristol; Mid Essex; Maidstone and Tunbridge Wells; Sandwell and West Birmingham; (not yet fully signed off) and the Royal National Orthopaedic Hospital (not yet fully signed off).

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  • rate this

    Comment number 281.

    Foreign nurses recruited by Oxford Radcliff Hospitals NHS Trust are being shown Fawlty Towers and the Two Ronnies to demonstrate to them how British patients are likely to use humour.....well some of 2Eds companions stiched the country up again like the new carriers...costs more to stop building than to build them...who really doesnt understand in the Lab party doesnt understand basic arithmetic

  • rate this

    Comment number 280.

    Not only the fact that the NHS is getting ripped off by high fees/repayments.. It transpired recently that the PFI firm that built the QAH in Portsmouth set itself up as an offshore company in Jersey and is paying next to no tax on their income from the NHS... I think the figure quoted was about £10k per year !!!

    Thank you Labour for another huge mess...

  • rate this

    Comment number 279.

    Quote "In 1992 PFI was implemented for the first time in the UK by the Conservative government of John Major." Unquote.

    The failiure of the PFI system in this case does not prove the inadequacies of any particular political party but the failiure of bull**** madcap Neoliberal economic ideas that look great on paper but in thruth hide all the sordid details.

  • rate this

    Comment number 278.

    Further to my Posting 230 -

    Yes, my local hospital (brilliant medical staff) is one of those believed by the Government to be at risk because of PFIs.

  • rate this

    Comment number 277.

    Governments of all colours are less than honest with procurement policies and their application. From UK taxpayers' perspective PFI does not withstand strict financial scrutiny if a full business assessment were made during project planning. A non ballot box method to bring failed decision makers to book would concentrate their minds on the practical issues in hand rather than their re-election.

  • rate this

    Comment number 276.

    In 1992 PFI was implemented for the first time in the UK by the Conservative government of John Major. Proponents of the PFI include the World Bank, IMF and (in the UK) the CBI.
    PFI continued and, in fact, expanded under Labour, resulting in criticism from many trade unions, elements of the Labour Party, the Scottish National Party (SNP), and the Green Party.
    It’s a funny old game Saint!

  • rate this

    Comment number 275.

    The thing that gets me, is that as in "Yes Minister & Yes Prime Minister" much of the background work for PFI is carried out by civil servants & other "experts".

    People need to be made legally responsible & LIABLE for this attrociousness, the levels of incompetance/failure during Labours terms in government are fully treasonable & at ALL COSTS MUST BE PREVENTED FROM EVER HAPPENING AGAIN.

  • rate this

    Comment number 274.

    15 Minutes ago

    Gordon Brown chose to fund in this way,
    Wrong. Too young to remember or too ignorant of the facts.

  • rate this

    Comment number 273.

    So all you political idiots who say its all Labour's fault - read the history books."

    Though Labour were particularly inept at some of their contract negotiations. Instead of using monopoly purchasing power to their advantage as a commercial business would, the suppliers used it to their advantage. Same with the deals on drugs and salary deals with GPs and consultants.

  • rate this

    Comment number 272.

    2 Minutes ago
    I'm 67, been retired for 2 years, spent over 22 years in the forces and have never had a days sick pay in my life. Can you say the same. As for political venom, I haven't voted for 30 years. Don't trust any of them. Learn the facts before shooting your mouth off. What do you do for a living, push a pencil.

  • rate this

    Comment number 271.

    The PFI initiative was a big con, used by both Tory & Labour to disguise true costs, also a nice wee earner for the Corporates.

    However the question remains, do we want to be a nation which knows "the cost of everything & the value of nothing", this is where we are going fundamentally wrong. Value for money, yes, but cost should not come before a decent society which looks after it's citizens.

  • rate this

    Comment number 270.

    C'mon guys!!! A certain satirical magazine published fortnightly has been commenting on this for years!!!!! Why does it take one of the largest news corporations in the world years to catch up! It's not new news anymore and hasn't been since 2002!

  • rate this

    Comment number 269.


    "5 Minutes ago

    "... PFI- it was designed so that government debt for the capital costs was structured too (sic) keep it off the nation's balance sheet..."

    Absolutely spot on - this scheme was designed to create the conditions suitable for EMU - reduce the PSBR by effectively abolishing state-funded capital building programmes, placing them in the hands of private sector

  • rate this

    Comment number 268.

    Time for Brown and his other incompetent cohorts in cabinet to be made accountable for their criminal negligence.


    Bit harsh.

    I'd settle for simple negligence.

    And inept, blinkered, naive, irresponsible, idle, ignorant, extravagant, cowardly, populist, warmongering, apologist, moronic, europhilic kowtowing, unqualified, unelected and unpatriotic.

    Not criminal.

  • rate this

    Comment number 267.

    Colleges around the country are also being being by private contractors who know nothing about college design. The result might look nice, but repeatedly the space is poorly used, limiting the intake of students, and science labs are poorly designed and quite frankly, more hazardous than they should be. Still, ministers will bend-over backwards to take the carrots offered by the fat-cats.

  • rate this

    Comment number 266.

    Surely the issue was not so much that PFI was a little more expensive it was that the last government bought too many new buildings on the "never never". We have to cut our coat to suit our cloth we cannot decide to rebuild every school and every hospital on tic if we could not afford to do it.

    I would love a mortgage on a 100 room mansion but...

  • rate this

    Comment number 265.

    I knew it! As a former Labour voter and member I watched a government wiwithhout vision and imbued with a mean spirit and incompetence, frightened by a feral News International run wild with money that should have been spent educating the young for employment.
    Schools and hospitals could have been built using taxes, not fighting in American inspired wars of attrition in Iraq and Afghanistan.

  • rate this

    Comment number 264.

    "PFI was implemented in 1992 by John Major's government and was attacked by the then Labour opposition who said it amounted to "back door privatisation".

    They were wrong about this - it was FRONT door privatisation of the NHS capital building programme.

  • rate this

    Comment number 263.

    The PFI experiment was a bad joke from day one, this just proves it once and for all. Maybe Blair should be sent the bill.

  • rate this

    Comment number 262.

    Its not so much the build cost thats the issue here.Its the 20/30yr contracts for building maintenance thats causing the problem.When the contract ties in the building firm to maintain,from changing a light bulb to general repairs,thats where the extortionate costs come in to play.There have been examples of late that changing a light bulb can cost upto £100!!Maintenence needs renegotiating.


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