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 321.

    108. AuntieLeft
    I agree with what you are saying, but since coming to power Bertie has signed off Billions of pounds of....err....PFI agreements in his 1st year.
    The great rip off continues, but yes the total obligation of £267 Billion left by Labour is eye watering to put it mildly.

  • rate this

    Comment number 320.

    "295.Chris London

    3 Minutes ago

    "The PFI programs that were implemented under John Major actually delivered."


    Proof please. What measures and evidence do you have that the schemes under John Major delivered?

  • rate this

    Comment number 319.

    Just now
    2 Minutes ago
    And so bitter with such a full life?
    Never joined forces, and not as old as you. Right now I work as a skilled professional with practical installation experience - earning topay tax for your pension payments. So you get your facts right before getting shirty with someone you dont know.

  • rate this

    Comment number 318.

    I don't see how the NHS can get out of this one that a former government thought was a good idea.

    Instead someone should be looking at NHS system in its entirety, and public sector as a whole to work out where the waste is and re-focus on things that are necessary rather than not.

  • rate this

    Comment number 317.

    I see the boys from Millbank Tower have gone to Town on this one,anything to shift the blame from the total cock up which is the condemned governments version of Health Reform!

    Without PFI our health service would be in the same useless state it was after the last 18 years of a Tory government.

    The problem with PFI isn't the idea i it's the incompetent negotiation of the arrangements.

  • rate this

    Comment number 316.

    Guess what, we all know where the money has gone. Our criminal lords and masters have agreed a nice little deal and the money is laundered through cayman Islands. Not only do we bail out bankers but we provide the living for the well upholstered backsides of 'legal' business on their nice sunseeker Yachts. That's what we English do as ever and what control do we have over our British Government?

  • rate this

    Comment number 315.

    i think that its right what they are doing regarding the NHS as the hospitals are given millions of pounds and the money is given to the wrong departments .ie overtime when not needed.matrons on overtime doing nurses jobs or even just pushing beds around which is a porters job.there should be more specialised nurses.more time for the elderly, it should be given in the right department.

  • rate this

    Comment number 314.

    256. TheTruthAboutPFI
    ’..PFI ..was introduced in the 1990s by THE LAST TORY GOVERNMENT ..’

    So what?

    Labour were in office for 13 years, & spent far more on PFI than the Tories! They didnt have too!

    Unless of course it suited their agenda of spend spend spend, which it did!

    You are more like 'The half truth about PFI' !

    Get it right, please!

  • rate this

    Comment number 313.

    It would be interesting to see if any of the signatories to any of the contracts are now on the board of directors of those same companies, or hold some sort of consultancy role associated with them.

  • rate this

    Comment number 312.

    There simply would not be funding problems for anything if we didn't give away so much money. Britain does have the money - it just chooses to give it away rather than spend it on its own people/infrastructure.

    Until people decide to do something about it nothing will ever change. Meanwhile hospitals and schools etc will continue to close to the detriment of those needing to use them.

  • rate this

    Comment number 311.

    Once again an ever so clever financial 'trick' is shown is shown to be disastrous. When will we ever learn. More to the point, this use of smoke and mirrors to make things look better is exactly what is going on with the NHS privatisation - how long before it falls apart completely.

  • rate this

    Comment number 310.

    221.Brian Brett
    The Conservative Party have tried to abolish the NHS since it was first introduced in 1945. Margaret Thatcher tried to take the glory for it when she was in office. The sooner we get this Posh lot out the better.


    Yep, the Tories tried to reintroduce slavery as well, didn't they?
    And impaling and boiling alive?
    And square wheels on cars?
    And woolly mammoth hunting?

  • rate this

    Comment number 309.

    Problem is we don't have the money to build new hospitals, we have a £122bn deficit this year, so we have to rely on Private money, just like in the 1980' when Thatcher had the same problem, because of the deficit left by the previous government. We either increase the deficit, (risking a Greece style collapse & greater austerity), or use Private money? That's your choice... Rock and a hard place

  • rate this

    Comment number 308.

    A massive drain on the economy, ..This 'free' service, sooner or later, will simply be too expensive to run."

    Except the NHS costs half what the largely private healthcare service in the USA costs and has better outcomes in life expectancy and infant mortality. It is cheaper by about 20% than France and Germany (who have slightly better outcomes). For what it does it is effective.

  • rate this

    Comment number 307.

    Lemog - you're right, it all would have been roughly the same results whoever was in charge we'd just have different faces to blame.

  • rate this

    Comment number 306.

    Many private Companys see the NHS as a cash cow.
    After all its only the tax payer that foots the bill.
    From drug to IT companys its a case of "dip yer bread"

  • rate this

    Comment number 305.

    We all have very short memories!!! The Tory party had left the NHS in a total unfunded mess. What the labour party did was bring our NHS into the modern times. Yes this has and will cost money but, the NHS has never been better at patient care. Now the Tory party are going to unravel all the good work done by Labour because they are only interested in looking after the well off as usual.

  • rate this

    Comment number 304.

    Lesson from history:
    On the accession of Charles II, a proclamation was issued commanding all persons holding possession of any jewels or plate belonging to the Crown, to restore the same. He appointed a commission "to examine the accounts of the so-called trustees, contractors, or treasurers, for the sale of the late king's goods.”
    Assets were returned and contracts renegotiated.

  • rate this

    Comment number 303.

    PFI, dreamed up by the tories and used to maximum disastrous effect by labour. There is virtually no difference between the two main political parties and, as we have learned to our cost, the libdems too.
    If the coalitions nhs top down reforms (which they promised not to do) go ahead, expect a lot more of this and the end of the nhs as we know it

  • rate this

    Comment number 302.

    I'm sure if the Government can rewrite the contacts of NHS staff to rob them of thier pensions, they can rewite the PFI contacts too.


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