PFI costs put hospitals on critical list

More than 60 NHS hospitals are 'on the brink of financial collapse' because of costly private finance initiative schemes. These figures should come with a health warning...

by Dave Waller
Last Updated: 06 Nov 2012
Twenty-two health service trusts have got hold of health secretary Andrew Lansley claiming their ‘clinical and financial stability’ is being undermined by the costs of the PFI contracts. Between them the trusts, including Barts and the London, Oxford Radcliffe, North Bristol, and St Helens and Knowsley, run more than 60 hospitals which care for 12m patients. Read on with caution if you have a dicky ticker…

Under PFI, private firms pay to build the hospital and own the building for up to 35 years, leaving the NHS to pay a ‘mortgage’ over that period - with interest – as well as paying the contractor to maintain it. Which may have made sense when people thought they had money (remember that?). But public payments for PFI deals tend to be linked to inflation, and the cost to taxpayers has increased by up to a third since the beginning of the credit crisis, according to the National Audit Office. Department of Health figures show yearly bills are forecast to rise by 75% to more than £2.5bn in the next 18 years.

Apparently more than £70bn will have been paid for hospitals by the time the last payment’s been made – in the distant mists of 2049. And this when the combined value of the building projects stands at a mere £11.4bn. Ouch. The £70bn total does include some expenditure on maintenance and cleaning, but still – that’s a hell of a pill to swallow. Especially when that 30-odd year period will be fraught with plenty of other costs (not least the hugely controversial pay being doled out to much of the  NHS top brass).

Of course it’s a decent opportunity to each side of the political spectrum to go at the other with a scalpel. The Coalition are blaming Labour for introducing 103 PFI schemes, arguing that it’s left many trusts with an untenable burden, while Labour are countering with the fact that it was Tory neglect of the infrastructure that resulted in ‘crumbling and unsafe’ buildings in the first place.

So now we have the Government saying the future of some trusts is at risk, having been lumbered with PFI deals they simply can’t afford (as well as an NHS computer system it’s now having to revamp). Indeed, it’s not like we haven’t seen the perils of the buy now, deal with it later culture elsewhere in society of late.

One possible solution is to try to renegotiate the terms of the PFI deals. But why would the lenders buckle? Surely they’ll just assume the state will bail out trusts when they get into trouble, and instead stick to their guns. More likely is that they’ll have to find extra money to ‘prop up’ PFI hospitals. That's precisely what you don’t want to hear when the Treasury is pretty much flatlining - or at least would be if it could afford the beeping monitor gizmo.

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