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 301.

    It doesn't matter who technically invented the 'PFI' concept, NuLab's usage of them was so shameful because they were utterly useless at negotiating them.

    The PFI companies must have been barely able to conceal their laughter when presented with idiotic NuLab ministers more interested in 'Looking Sexy' than reading the fine print on contracts.

    NuLab couldn't have managed booze-up in a Brewery!

  • rate this

    Comment number 300.

    The same issue arises with schools, whose costs to sustain PFI are taking funding away from educating children. And the Government has just launched a new PFI scheme for schools. Perhaps Mr Lansley should explain his concerns to Michael Gove?

  • rate this

    Comment number 299.

    Congratulations New Labour, you really did leave one almighty mess! They have / had absolutely no shame in squandering other peoples money.

  • rate this

    Comment number 298.

    289.David Horton

    Just now

    But under the Tories it was affordable; under Labour it wasn't."

    Where is your proof of this? Please supply the evidence, such as the accounts for all the PFI schemes pre- and post- 1997.

  • rate this

    Comment number 297.

    NHS may've worked well as a concept, but far from an institution we should be 'proud', we should start to see this for what it is.. A massive drain on the economy, a license to approve vast sums of public money on mindless ventures. This 'free' service, sooner or later, will simply be too expensive to run.
    Yes let's swap to the USA system Twice as expensive and far worse clinical outcomes.

  • rate this

    Comment number 296.

    The people who sell these schemes do so in the knowledge that by the time it is found out to be a white elephant and costing a fortune they will be long gone and will have trousered a juicy bonus for bringing in what was sold as a cost effective and efficient service/installation.
    The fact is that the people entrusted with sanctioning these projects are usually the least competent to do so.

  • rate this

    Comment number 295.

    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.

    The Tory's didn't come up with this it was imported from Australia. The PFI programs that were implemented under John Major actually delivered. Labour took a flawed idea and made it something preposterous. That's Labour

  • rate this

    Comment number 294.

    Nurses are in the middle of a 2 year pay freeze ,with inflation at 5%.
    Nurses are to be expected to pay another 3% of their incomes to "fund" a pension scheme which is already in credit to the tune of £2 billion a year (not retained but paid to the exchequer)
    Nurses have to pay for their own regulatory authority.
    Where 40,000 nursing posts are at risk.
    This is the real NHS disgrace!

  • rate this

    Comment number 293.

    This initiative was a right wing mess created by the Tory government in the 90s. Labour either could have ditched this idea, costing millions, or continued. They opted for the latter. To put blame on Gordon Brown is nonsense, it's those on the inclined right jumping on the bandwagon before loking at the bigger picture. If you look back in history, this country wasted billions in the 80s & 90s.

  • rate this

    Comment number 292.

    The NHS may've worked well as a concept in the 50's and 60's, but far from an institution we should be 'proud', we should start to see this for what it is.. A massive drain on the economy, a license to approve vast sums of public money on mindless ventures, and a political football to be endlessly dribbled to and fro. This 'free' service, sooner or later, will simply be too expensive to run.

  • rate this

    Comment number 291.

    " KingRichardIII

    If this were private sector they would be sacked. What happened? "

    Rather ironic screen name, then, isn't it!

  • rate this

    Comment number 290.

    The NHS is incredibly inefficient and costs should be cut without harming the services we all rely on.

    PFI has been a rip-off from the start. All PFI contracts should be renegotiated so that while the lenders are not left out of pocket, fair rates are paid instead of the rip-off rates we have now.

    Oh, and the politicians who set them up should be done for fraud, treason or similar.

  • rate this

    Comment number 289.

    The Private Finance Initiative. - Another one of the brilliant Conservative ideas of the 80s and 90s that has helped make Britain the success it is today.


    But under the Tories it was affordable; under Labour it wasn't.

    So presumably you must then agree that the Tories are better at managing money than Labour?

  • rate this

    Comment number 288.

    Only 2 weeks ago we were told that some hospitals should not have been built and would have to close as the aging population needed more community based care.

    Not only did Labour get the policy wrong they mortgaged us to the hilt to do it.

    If this were private sector they would be sacked. What happened? Prominent positions on the world stage and peerages. No wonder things don’t change!

  • rate this

    Comment number 287.

    The theory behind pfi was fine.
    The reality has been disastrous.
    Getting the expertise of the private sector is no good if the contracts are ripoffs.
    Using pfi to hide govt spending, is also dishonest.
    For all the Labour rhetoric, it is actually they that have presided over the most massive sell off of public services through pfi
    We will be paying for decades.
    Our poor old nhs.

  • rate this

    Comment number 286.

    For the 22 trusts listed at the end of this article it would be interesting to see which parties returned their local MPs at the last election, and which parties control their local authorities. Why? Because I see some very blue and yellow hues to them which makes me think that at a local level the coalition may have acutally supported these schemes.

  • rate this

    Comment number 285.

    In north Wales a 'new' organisation was created in the NHS, Betws Cadwalladr, an amalgamation of several hospitals into one unit for 'efficiency'. Not one manager lost a job' or wage was cut and they were given new titles.
    People are frightened to use the hospitals in north Wales for the fear of incompetent doctors chopping the wrong leg off or ignorance by uncaring nursing staff.

  • rate this

    Comment number 284.

    4 Minutes ago
    15 Minutes ago

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


    Nope, I am 48, and well in command of the facts. Nu-Labour racked up huge spending on PFI. Are you denying this?

    Perhaps you are just a little jaundiced.

  • rate this

    Comment number 283.

    I trust all you who are up in arms about PFI heard the performance by Lansley on Today this morning? He was informed by both the interviewer and an expert that the situation was NOT as the headlines stated but still went rabbiting on attempting to score political points. When will politicians learn that what voters want when it comes to the NHS is straight answers NOT political points scoring?

  • rate this

    Comment number 282.

    When 'Civil Servants' are involved in contract negotiations they make a mess of it (NHS, MOD). Tesco haven't got in a mess despite building hundreds of new stores. Let market forces prevail. Problem Trusts go bust. The providers, without the income stream also go bust. Adjacent Trusts buy back the assets at a 'fair price'. PFI speculators get their just returns, we get the NHS back.


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