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
    +1

    Comment number 341.

    Labour and Tony Blair have ruined this country.We now live in a country were a nurse can be unemployed were once they were jobs for life.I thought the tories were arrogant but New labour and tony blair take the biscuit.

  • rate this
    -6

    Comment number 340.

    314.Andy_Pandy1968

    3 Minutes ago

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

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

    ===

    My only comment back to you is learn the difference between "to" and "too" and when each should be used in their proper context.

  • rate this
    -50

    Comment number 339.

    We need replace the NHS. It, and most people working in it, is not fit for purpose.

    The govt can save money and improve care in the immediate by improving training, making nurses etc responsible for caring for their patients, stop employing foreign and agency staff, cutting some treatments, charging for others.

    But it should then move towards a European style insurance-based model.

  • rate this
    +15

    Comment number 338.

    I never agreed with the PFI idea and it was blindingly obvious from the start that Private Companies would take advantage at every opportunity to bleed as much money from the taxpayer as possible.
    On this ocassion it is clear that Lansley, under pressure due to his mad scientist plan to reform the NHS is seeking to deflect critiscism and blame onto Labour. His cuts are causing the real damage.

  • rate this
    +2

    Comment number 337.

    I seem to remember during the banking crisis 2008 that some PFI projects were having financial trouble & the government (taxpayers) had to bail them out. So as I understand it we have taxpayers financing PFI projects so that PFI companies can lease the Hospitals back to the taxpayers. MADNESS.
    Maybe Nick Triggle could look into this & if I am correct, expose this folly.

  • rate this
    +13

    Comment number 336.

    Paying in instalments for something is always going to be more expensive than paying up front. If PFI had not been used, where would the money have come from to build these hopsitals? Are we saying it would have been better NOT to have built them rather than use PFI?
    How would we have got these hospitals in a way that would not have added to government borrowing?

  • rate this
    +2

    Comment number 335.

    I have worked at some of the hospitals in question and PFI is a challenge. To get the PFI case through the assumption will be break even. Basically a cash payment has to be found each quarter to pay the rent irespective of position. With an owned hospital even if you are not break-even , you will still have cash to pay bills as part of the expenses will be depreciation which is non-cash.

  • rate this
    +2

    Comment number 334.

    309. Divots
    in reality, using private money doesn't really make the deficit better. Private companies will want to take over those bits of the NHS that make money, and leave the loss-making ones to the taxpayer. As a result, the taxpayer won't actually be better off, and quite likely worse off.

  • rate this
    +6

    Comment number 333.

    @ 325 Yes there is, actualy. I dont recall the number, but refer to privater Eye issued march 2002 for evidence of the scandelous sale of all Inland Revenue (IR) property to Mapley and the agreement to rent them back. The assets were willing sold cheap and Mapley imediately resold all the uk assets to a company registered offshore to that none to the payments from IR were taxable.......

  • rate this
    +1

    Comment number 332.

    the trusts should default on the cash payment and renegotiate terms.
    If a few of them did it , it would destablise the pfi provider, as there are only a few in the market and they will have multiple contracts. this would bring the PFI provider quite quickly to the table with a reasonable offer otherwise they would go under.

  • rate this
    +2

    Comment number 331.

    British Medical Association said: "Locking the NHS into long-term contracts with the private sector has made entire local health economies more vulnerable to changing conditions. Now the financial crisis has changed conditions beyond recognition, so trusts tied into PFI deals have even less freedom to make business decisions that protect services, making cuts and closures more likely."

  • rate this
    +4

    Comment number 330.

    I can't believe people are saying this is a non-story- it's a fiasco that should have been picked up by the press a long time ago. Glad to see it's finally being reported as few people seem to be aware of just how big a scandal this is.

  • rate this
    -2

    Comment number 329.

    284.Andy_Pandy1968
    22 Minutes ago
    274.JonDM
    4 Minutes ago
    234.Andy_Pandy1968
    15 Minutes ago


    Nope, I am 48, and well in command of the facts. Nu-Labour racked up huge spending on PFI. Are you denying this?
    =
    PFI scheme created thew debts in NHS, if they exist. Tories created PFI. Are you denying that?

  • rate this
    +3

    Comment number 328.

    @313 Quo Vadis

    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.
    *
    Very good point!

    Not sure about NHS contracts, but that was certainly common for the Railways.

    Private Eye regularly exposes such ministerial corruption, with PFIs a speciality.

  • rate this
    +2

    Comment number 327.

    Rising PFI costs 'putting hospitals at risk'

    That’s one way of looking at it.

    The truth is Gordon Brown chose to fund things in this way. This was in addition to all the regular Government spending, which created the biggest Government debt since World War 2, before we even count the PFI spend!

    Nu-Labours profligate spending ‘putting hospitals at risk’ is the truth!

  • rate this
    -1

    Comment number 326.

    @78.kencharman
    Anyone who says the UK economy is the same as that of Greece should be charged with treason
    The markets work on confidence, as it stands the markets are completely confident the UK is not like Greece & so maintain our credit rating & lend to us on a long term basis at low interest rates
    If the likes of you manage to convince them they're wrong then all that will change.

  • rate this
    +3

    Comment number 325.

    316.leoRoverman
    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.

    Really? I mean really? Do you have any evidence to back this up or is that the rumour Elvis & Marilyn Monroe told you which was handed to them by Lord Lucan riding Shergar? I mean have a sensible comment or pipe down

  • rate this
    0

    Comment number 324.

    295.Chris London
    "The PFI programs that were implemented under John Major actually delivered. Labour took a flawed idea and made it something preposterous."

    -----
    Sorry, I'm a bit confused. If the PFI programmes implemented by John Major "delivered", surely it wasn't a flawed idea?

  • rate this
    0

    Comment number 323.

    317. steve

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

    --

    Labour incompetent? You will have the champagne socialists up in arms admitting that old chap.

  • rate this
    +1

    Comment number 322.

    PFI is one of the ways NuLab managed to ruin the NHS whilst increasing spending.

    You can't have private finance in the health service. It just does not work. Curing people and making money do not go together.

 

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