Patient care is under threat at more than 60 NHS hospitals which are “on the brink of financial collapse” because of costly private finance initiative schemes the Health Secretary warns. Andrew Lansley says he has been contacted by 22 health service trusts which claim their “clinical and financial stability” is being undermined by the costs of the contracts, which the Labour government used extensively to fund public sector projects.
The trusts in jeopardy include Barts and the London, Oxford Radcliffe, North Bristol, St Helens and Knowsley, and Portsmouth.
Between them the trusts run more than 60 hospitals which care for 12 million patients.
There is already evidence that waiting lists for non–urgent operations have begun to rise as hospitals delay treatment to save money. Adding to this are growing fears over the impact of the financial crisis on care this winter.
Under the PFI deals, a private contractor builds a hospital or school. It owns the building for up to 35 years, and during this period the public sector must pay interest and repay the cost of construction, as well as paying the contractor to maintain the building.
However, the total cost of the deals is often far more than the value of the assets. As a result, Mr Lansley says, the 22 trusts “cannot afford” to pay for their schemes, which in total are worth more than £5.4billion, because the required payments have risen sharply in the wake of the recession.
Mr Lansley said: “Over the last year, we’ve been working to expose the mess Labour left us with, and 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. Tough solutions may be needed for these problems, but we’ll help the NHS overcome them. We will not make the sick pay for Labour’s debt crisis.”
He said hospitals would not be allowed to collapse financially.
“There are many hospitals that are well run, do not have a legacy of debt and do have projects which are perfectly sustainable. My point is that we have looked since the election and are working together with individual trusts to arrive at a place where they are financially, and in terms of the quality of their services, sustainable for the future. We can only do that if we work closely with them,” he said.
“This is about making very clear that we are not only working on unsustainable PFIs, but also working with legacy debt that the NHS has been left with, working on the IT programmes which were on an unsustainable scale of contractual commitments that didn’t meet the need of the NHS’s customers.
“Across the board, we have to tackle Labour’s legacy of poor value formoney and debt.”
Over the next few weeks, Department of Health officials and executives at the 22 trusts will develop detailed plans for dealing with the crisis. Their proposals are expected to include significant cost–cutting and the renegotiation of PFI contracts.
Money will also be moved from NHS trusts that are in better financial shape to cover the debt costs at those that are struggling. However, officials are braced for the need to use Whitehall funds to bail out some hospitals.
Among the trusts which have contacted Mr Lansley to inform him of their severe financial problems are several London institutions, including South London Healthcare, Barking, Havering and Redbridge, and North Middlesex.
Outside the capital, other trusts to have approached the health department include Wye Valley, Worcester Acute Hospitals, Mid Yorkshire, and Walsall.
After the general election last year, Mr Lansley ordered officials to establish why some NHS hospitals were under–performing. The health department is assessing the financial position of every hospital. It is understood that the PFI costs have emerged as a leading factor in poor patient care in some areas.
The Health Secretary decided to disclose the list of hospitals in difficulty and is expected to announce the rescue plans for each trust next month.
Taxpayers are having to pay more than £200 billion for schools, hospitals and other projects whose capital value is little more than £50 billion.
In one example, a hospital in Bromley, south east London, will ultimately cost the NHS £1.2 billion, more than 10 times what it is worth. Another hospital was charged £52,000 for maintenance that cost £750. The annual cost of the schemes is almost £400 for each household.
The public payments for PFI deals are typically linked to inflation and therefore the cost to taxpayers has increased by up to a third since the beginning of the credit crisis, according to the National Audit Office. Last month, MPs on the Treasury select committee effectively called for a moratorium on new PFI projects, which it said were “like a drug” as the costs were not apparent at the outset.
George Osborne, the Chancellor, has tightened the rules on the deals.
Earlier this year, John Healey, the shadow health secretary, admitted in an interview that Labour ministers had failed when negotiating the multi–million pound schemes for hospitals.
“There is definitely a case for saying we were poor at PFI, poor at negotiating PFI contracts at the outset,” he said.
Companies who run PFI schemes boast profit margins of up to 71 per cent on the projects, but have come under growing pressure from MPs and ministers to return some of their “windfall profits”.