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.

Analysis

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.

Renegotiation

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
    -7

    Comment number 261.

    This is a non story-just an excuse by NHS Trusts to avoid the admission they are fiscally incompetent.Long term forward budget planning is based on forecasted data (terms and conditions of the PFI) provided by the former Government.The reality is that when these T&C were developed by Mr.Brown and Co they screwed up the financials.
    All done to disguse increase debt and NOT on the books.

  • rate this
    -2

    Comment number 260.

    247.
    benbowlane
    Admin of drugs etc. was fine but there was a definite lack of "care" about it all. Beds went unmade for days on end. Nurses seemed very understaffed. Saw 3 Doctors, only 1 had a good command of English. Am I cured, no. Still in considerable pain and on a 3-4 month waiting list for an operation Where's all this, Labour controlled Wales
    ** No different in tory England.

  • rate this
    -1

    Comment number 259.

    Mr Triggle's report is so vague that you have to wonder if it's just a piece of mischievous pot-stirring. We can only speculate who is behind the story and the motivation for it. Not good enough.

  • rate this
    +2

    Comment number 258.

    This was predicted from day one, and as usual the politicians ignored what was being said. Both main parties agreed with it at the time though, so nobody's a winner. The politicians lose, the NHS loses, the patients lose. Oh no, I'm wrong, the privateers who did the building are making money hand over fist. You have to admire their lobbying. When will we ever learn?

  • rate this
    0

    Comment number 257.

    By 2007 the total capital value of PFI contracts signed throughout the UK was £68bn, committing the taxpayer to future spending of £215bn over the life of the contracts. The global financial crisis presented PFI with difficulties because sources of private capital had dried up. But PFI remains the UK government's preferred method for public sector procurement under the present coalition?

  • rate this
    -5

    Comment number 256.

    I see the historical revisionists are at it again. PFI for health buildings was introduced in the 1990s by THE LAST TORY GOVERNMENT and it was Margaret Beckett as Labour's SHADOW health secretary in 1996/7 who said that the next incoming Labour government would CONTINUE (not invent) the TORY PFI programme. So all you political idiots who say its all Labour's fault - read the history books.

  • rate this
    +2

    Comment number 255.

    Yet again the private sector is allowed to milk the taxpayer due to political incompetence. Will this ever end and who will take responsibility?

  • rate this
    +4

    Comment number 254.

    This is why privatisation is bound to fail - the private sector simply cannot deliver on tight budgets. This desire of government to hand-over projects to business fat-cats who bribe, I mean sponsor, the government (after purchasing exclusive access to totally straight and not at all corrupt political parties) is a waste of money and resources.

  • rate this
    +3

    Comment number 253.

    PFI was the governments wayof borrowing off balance sheet - it did not appear as public spending.

    It was always an expensive way of delivering public services, but it does allow them to be delivered quickly. It is a form of hire purchase.

  • rate this
    0

    Comment number 252.

    It is time we take our own healt in our own hands!

  • rate this
    -1

    Comment number 251.

    247.benbowlane
    3 Minutes ago
    Still in considerable pain and on a 3-4 month waiting list for an operation Where's all this, Labour controlled Wales.
    =
    Use your time on sickness benefit (while it still exists) to see who introduced PFI to the UK, and then direct your political venom appropriately.

    Thats said, I sinecerly wish you recover well.

  • rate this
    -1

    Comment number 250.

    At least PFI produced new hospitals this government is now spending billions of pounds (August 2011 government borrowing highest on record)
    paying for millions to be unemployed!!!!

  • rate this
    +3

    Comment number 249.

    The Government is happy to break the pension contracts of health workers and set new terms. Why don't they break the PFI contracts?

  • rate this
    +1

    Comment number 248.

    The more I think about this article - the more I am convinced that it is a non-story as a. inflation does not mean anything as the relative cost remain the same and b. the issue is if this is cheaper than non-PFI way of funding. What is this article doing here?

  • rate this
    +1

    Comment number 247.

    Recently spent 10 days hospitalised with prolapsed disc. Admin of drugs etc. was fine but there was a definite lack of "care" about it all. Beds went unmade for days on end. Nurses seemed very understaffed. Saw 3 Doctors, only 1 had a good command of English. Am I cured, no. Still in considerable pain and on a 3-4 month waiting list for an operation Where's all this, Labour controlled Wales

  • rate this
    0

    Comment number 246.

    The writing was on the wall when you let private firms deal with the NHS. Private Finance is not tisk free, the Government should pay for the Hospitals not the Private Sectors who just money orientated. Look at how much we pay for parking?

  • rate this
    +3

    Comment number 245.

    I supported Labour before 'Bliar the Cuckoo', but the best example of how badly he corrupted the party has to be their handling of the NHS.

    NuLab were elected saying 'X days to save the NHS', but then crippled it with arrogant stupidity.

    Brown's obsession with 'PFI Off Balance Sheet Spending' has doomed the NHS & made privatisation almost inevitable.

    Aneurin Bevan must be spinning in his grave.

  • rate this
    +2

    Comment number 244.

    An insight into the future, with the government's plans to farm out NHS business to the private sector, taking money out of the public sector and transferring it to huge private, greedy companies, exactly the problem the world faces today. Debt =power= influence=greed=more debt and even more control, moving what little the poor have into already rich pockets. When will the world finally see this?

  • rate this
    +3

    Comment number 243.

    When you look behind many of these stories about overly expensive projects, or the fragility of banks, you find that those running these entities have enormous personal wealth. It is well-known that PFI managers take very handsome rewards. Our economic problems have a very simple cause: greedy people have been helping themselves to too much money, leaving the rest of us to pick up the bill.

  • rate this
    +4

    Comment number 242.

    it was the Tories. It was Labour. It was the Tories. It was Labour...

    and these fools are running the country...

 

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