NHS in England lumbered with massive private finance costs

By staff writers
August 13, 2010

The NHS in England is now facing a further funding crisis because of the debt with which it is saddled from Private Finance Initiatives - as unions and health advocates had long warned.

Figures obtained this week by the BBC indicate that the NHS faces a total bill of £65 billion for 103 new hospitals built under the Private Finance Initiative (PFI), a way of creating 'public–private partnerships' (PPPs) through the funding of public infrastructure projects with private money on a commercial basis.

What is being described as an "NHS mortgage" means that some hospital trusts' annual repayments take up more than 10 per cent of their total turnover.

Analysts have said that the fees, which are rising each financial year, mean that less money is available for patient care. The additional costs also make it more difficult to achieve the £20 billion savings being demanded by the government - despite claims that the NHS is being protected.

PFI-led schemes mean that private firms pay for and build new hospitals and specialist health units, leaving the NHS to pay off what is effectively a mortgage over a period of 30 or so years - with a profit built-in and guaranteed whatever the economic conditions.

The data acquired by the BBC shows that the value of the projects when they were built was £11.3 billion, but costs for the NHS have escalated dramatically - by over five times the original value once additional expenditure such as maintenance, cleaning and catering is taken into account.

Critics have been saying for some time that the PFI empire is due to crumble, and that delays involved in privately funded schemes are costing the health service dear, both in efficiency and in mounting costs.

But governments of all political colours have been so ideologically wedded to the notion that 'private is more efficient' that they have been unwilling to look at the figures more critically.

Jonathan Fielden, chair of the British Medical Association's consultants' committee, has said in the past that private debts are "distorting clinical priorities" and impacting upon the treatment given to patients.

One example cited is that of of University Hospital Coventry, where the NHS Trust was required to borrow money in order to make the first £54 million payment owed to the contractor - and as a result was struggling for money before the hospital's doors even opened.

A Strategic Health Authority paper in 2007 said that debts at two major London hospital, Princess Royal University Hospital and Queen Elizabeth Hospital, had mounted as a result of high fixed PFI costs. Other hospitals in the capital and elsewhere face similar dilemmas.

The new figures also reveal the total level of repayments for the NHS in England is rising significantly.

In total, the NHS currently pays back £1.25 billion each year. This sum will go up year-on-year until 2030 when it will top £2.3 billion. The final payment is due to be made in 2048.

In theory, the NHS budget is being protected through ring-fencing under the massive cuts programme of the new coalition government.

But in realty, the health service has still been told to find up to £20 billion of savings by 2014. It faces increased cost pressures from an ageing population, the rising price of drugs and lifestyle issues such as alcohol damage and obesity.

Officials at the UK Treasury admit they may now need to seek to to renegotiate a number of PFI contracts in order to reduce payments and ensure continued delivery of services.

However, it is not clear that private financiers will cooperate, and some cases could end up in court.

Health unions say that the situation is one they predicted and an inevitable result of the 'creeping privatisation' of health under both New Labour and Conservative-Lib Dem governments.


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