NAO investigation into NHS Property Services published

By agency reporter
June 27, 2019

A new report by the National Audit Office has found that NHS Property Services Limited (the Service) lacks the powers it needs to make its tenants sign lease agreements and pay their rent, which has contributed to increasing levels of outstanding debt.

The Service was established in December 2011 to manage, maintain and improve NHS properties in England and facilities previously owned by strategic health authorities and primary care trusts. It operates 2,900 properties with an estimated value of £3.8 billion, and has approximately 6,950 tenants.

The Service has no effective way of getting tenants to sign formal rental agreements. Since 2013-14 the percentage of tenants without leases has increased from nearly two-thirds to 70 per cent. The Service has improved the quality of data it holds and introduced a new billing system in 2017, but many bills are still disputed, particularly by tenants without rental agreements.

The Service does not have the same powers as a commercial landlord for NHS tenants, limiting its ability to take action when bills are not paid. Action against non-NHS tenants, including GPs, must be approved by the Department on a case-by-case basis.

Outstanding debt has almost tripled, to £576 million, and tenants are taking much longer to pay their debts. In 2018-19, the Service only recovered 58.4p for every £1 it billed. Although GPs only occupy 18 per cent of properties, they owe 30% per cent of the current outstanding debt. Between 2014-15 and 2018-19, the Service wrote off £110 million of debt and a new arbitration process for resolving disputed bills is not working effectively.

The Service has met most of its estates management objectives. By March 2019, it had sold 410 excess properties at a value of £347 million, and invested £447 million in upgrading, maintaining and developing new facilities. The Service has also reduced the 2,400 separate facilities management service arrangements it inherited to around 50 contracts. However, in 2017 the Department estimated the Service had a backlog of maintenance work worth £1 billion.

The Service has not met the Department’s goal for it to become financially self-reliant. Between 2013-14 and 2018-19, it reduced its direct operating costs by £51 million. However, it recorded a loss in each financial year, with total losses of £1,010 million, including losses of £565 million that resulted from the revaluation of assets. The Service’s seven directors received total bonuses of £206,000 in 2018-19.

The NAO recommends that the Department, in collaboration with the Service and NHS bodies should: ensure that the Service and all of its tenants agree tenancy details and amounts by the end of March 2020; and put in place a process to ensure that all billing disputes are settled within 90 days. The Service should develop quality metrics for the accuracy of billing.

Gareth Davies, head of the NAO, said: “The Service has slowly improved the way it manages its NHS properties. However, more than eight years after being created it still lacks the powers it needs to run its affairs effectively, and the accuracy of bills is still disputed.

“In our view, too many NHS organisations and GPs seem to regard paying for their premises as optional, with almost £700 million either written off or still unpaid.

“The system for charging for NHS property is not working effectively and the Department urgently needs to address the fundamental causes of this unsatisfactory situation.”

* Read Investigation into NHS Property Services Limited here

* National Audit Office



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