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
    +3

    Comment number 361.

    It's too obvious where the problems lie. Different strategies every time a new government takes over?? The NHS should be decided by a panel of healthcare professionals who actually work IN the system and the patients themselves. Free choice of meals 24hrs/toiletries for every patient? It is a hospital, not a hotel.

  • rate this
    +2

    Comment number 360.

    To BrianBrown no. 285. I live in Coventry and I have been frightened to use my hospital for years. I have had a few members of my family use University Coventry and Warwickshire hospital and all of their experiences where bad. This has got nothing to do with funding though it is because of the attitude of the staff. People really need to stop painting doctors and nurses as being angels.

  • rate this
    0

    Comment number 359.

    Problem is not PFI but lack of knowledge within NHS boards and negotiating teams who are empowered to negotiate and sign off on these contracts. This is a problem of a highly devolved organisational structure, which allows Trusts to make their financial decisions independently. If the NHS negotiators can forget to include a stroke ward (Manchester ) why expect better decisions re financials...

  • rate this
    +4

    Comment number 358.

    PFI and its derivatives (PPP and LIFT Co) were initially about private sector expertise but under Labour simply became a source of off-balance sheet funding (ie, a ruse to hide government borrowings).

    Whether its not for profit or not - the fact remains the UK gov't was buying things it couldn't afford and paid a high price to hide it.

    Get ready now for borrowing against council rates via TIF!

  • rate this
    +5

    Comment number 357.

    293.toast

    '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'.

    Really ?? So GB isn't a buffoon after all ??
    No matter what your political persuasion is the facts speak for themselves - He made decisions which have done great harm to this country in the long term.

  • rate this
    +1

    Comment number 356.

    What cuts have caused real damage? I was unaware that any had been implemented in the NHS yet. Why did this get editor's pick, as it lacks fact?
    -------
    If you worked in the NHS you would know just how ridiculous your comment is!

    In my own hospital (the flagship NHS trust in the country) over 300 clinical posts are in the process of being down graded or lost.

  • rate this
    +4

    Comment number 355.

    If we Brits travel to countries where there is no "Free" health service then woe betide if we have no health insurance policy and become ill or need an operation.
    I believe that ALL foreigners who avail themselves of our NHS and yet have never contributed any NI or income tax should be charged for their treatment/operation especially any for any cosmetic/sex change operations.

  • rate this
    +3

    Comment number 354.

    344. Divots

    so effectively private money does help the deficit as the cost is ammortised over the term.
    ----

    so what if it's ammortised? You still have to pay it. And with the interest it's likely to be a lot more than for the gov't to just build a hospital. There is an assumption that the private sector will rush into the NHS: it will not. That's why the deals NuLab could get were so poor.

  • rate this
    -5

    Comment number 353.

    348. bigmouth strikes again

    What cuts have caused real damage? I was unaware that any had been implemented in the NHS yet. Why did this get editor's pick, as it lacks fact?
    --
    You realize that the PCTs are already disappearing and that chaos is running riot?
    What kind of fool wouldnt pilot such a massive reorganisation first?
    He's really desperate to get those private providers in there...

  • rate this
    +1

    Comment number 352.

    You have the same problem in contemporary health care as you have in contemporary education. These things should be provided as public goods, not treated as commercial enterprises. If you try to run them as businesses, what happens when they go wrong? HMG can hardly let them go bust. Sooner or later, Johnny Taxpayer has to pick up the bill. It would have been cheaper had it been sooner.

  • rate this
    +7

    Comment number 351.

    we need an overhaul of our political system.we need a mechanism in place that can identify financial incompetence and enact some hard hitting,prison sentence legislation.people should face prison for squandering our money.i don't pay tax for whitehall muppets to blow on hairbrained schemes that'll never deliver.the uk tax payer is just a cashcow for the private sector to ripoff helped by MP's

  • rate this
    0

    Comment number 350.

    "310. David Horton "

    I'm not sure when impaling and boiling alive (Series 2 of "The Tudors" notwithstanding) were ever part of our penal code, but witch burning and hang, draw and quartering maybe. Square wheel are surely some marxist concept ("stop complaining comrade") and Woolly mammoths have been hard to hunt for about 10,000 years. ;-)

  • rate this
    +4

    Comment number 349.

    Any money spent in hospitals should come from the Government. Not from outsiders.
    Anything bought including services should also come from a central negotiating / buying department.
    All equipment or consumables should be from here in Great Britain. Any money spent abroad is wastage !
    Buy British - British is best & It's Best For Britain !!

  • rate this
    +2

    Comment number 348.

    338.Howardcanitbe
    Comment number 338 is an Editors' Pick

    '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'

    What cuts have caused real damage? I was unaware that any had been implemented in the NHS yet. Why did this get editor's pick, as it lacks fact?

  • rate this
    +2

    Comment number 347.

    It’s not just the NHS. I know of one very large private UK Company that sold all its buildings and now rents them back. The same company also sold its spare equipment to a third party and buys them back as required!
    “Buying back an asset you previously owned?” I asked “Tax efficient.” I was told.

  • rate this
    -1

    Comment number 346.

    Tories cut funding & Labour increase waste with the "clipboard brigade" managers. The NHS is also struggling with incresed costs from non-nationals - interpreters cost approx £50 per hour - & now the funding payments to outside investors. We may have to decide if we keep our NHS as it is or create a 2-tier system maybe based on what you have paid in or some other criteria. Hard times ahead!

  • rate this
    +4

    Comment number 345.

    330. R Harris

    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.
    ---
    This has been well known for years. Lansley's new proposals will divert many more billions in private hands. We need to resist strongly to restore the NHS to its original ideals.

  • rate this
    +1

    Comment number 344.

    334.Stunned_Silence
    In reality, using private money doesn't really make the deficit better.

    Technically correct as private money won't reduce the deficit but won't increase it which the alternative would, i.e. using public money as capital to build hospitals, so effectively private money does help the deficit as the cost is ammortised over the term. It's just govt ejits put together poor deals

  • rate this
    +3

    Comment number 343.

    257. bigjohnthered

    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.
    ---
    wow. So this is why this country is in such dire straights: NuLab took public money and freely gave it to the profitmakers.

    68bn is nearly 10% of our whole national debt, right?

  • rate this
    +8

    Comment number 342.

    why's this only coming out now?Private eye have been reporting the PFI scam for years.add on this the 12billion nhs computer fund,the empty fire command centers etc,the list becomes endless and all one can conclude is that our politicians are totally inept and incompetent when it comes to handling our money.this is why we need cuts,to hide their staggering incompetence to the tune of billions!

 

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