Out-Law News 2 min. read

NHS trusts could receive Government support to meet PFI debts


Seven NHS hospital trusts struggling to repay their debts under private finance initiative (PFI) arrangements will receive financial support from the Government if they meet certain criteria, the Department of Health has announced.

A grant worth up to £1.5 billion over a 25 year period will be made available to the trusts, who have each demonstrated that they face "serious structural financial issues", where the problems are historical and the trusts can demonstrate that they are meeting certain performance measures.

The "rigorous" testing process had been designed to increase transparency and assure patients and taxpayers that additional funding would only be provided where the trusts would "otherwise be financially sustainable", the Department said in a statement.

The Department for Health said that it had identified trusts that were potentially eligible for support: Barking, Havering and Redbridge; Dartford and Gravesham; Maidstone and Tunbridge Wells; North Cumbria; Peterborough and Stamford Hospitals; South London Healthcare and St Helens and Knowsley.

In order to receive the funding the trusts must be facing "exceptional" financial problems beyond those faced by other organisations, and must demonstrate that they have a "clear plan" to manage their resources in the future.

They must also be able to show that they are delivering "high levels" of annual productivity savings while delivering clinically viable, high quality services. Among the criteria used to establish this would be reference to "low waiting times and other performance measures", the Department for Health said.

Michael Boyd, an expert in health and infrastructure law with Pinsent Masons, the law firm behind Out-Law.com pointed out that the money was not simply made available to trusts in financial difficulty because of their PFI arrangements but that "other, more exacting criteria" were applied. "The bar was set quite highly for these trusts," he said.

"One important question, therefore, is how other trusts which are in such difficulty will be helped – it may be that they won't be helped at all. If so, their financial misery will be prolonged and there may be an adverse impact on clinical services. Without central help, it is almost impossible to see how some struggling NHS trusts with PFI arrangements, and their patients, can avoid a dangerous and self-defeating spiral of financial decline – with everything that goes with it," he said.

Last year a Government report found that 22 hospitals were facing difficulties because payments under PFI schemes were amounting to up to a fifth of their budgets – a figure which, in some cases, included services such as maintenance, cleaning and catering as well as building costs. The PFI model is a method of utilising private sector capital as a way of funding major public infrastructure projects, but critics have suggested that higher borrowing costs as a result of the recent economic downturn have resulted in the long-term expense of the model becoming much higher than for other, more conventional, forms of borrowing.

The combined value of NHS PFI projects is £12.6bn, according to Department of Health figures.

Health Secretary Andrew Lansley said that the funding announcement was the "latest stage" in a programme of work designed to identify and tackle financial problems at local level in the NHS.

"In the past, local trusts have received extra funding on the quiet in order to avoid embarrassment. We have already signalled that we are determined to end these backroom deals by bringing greater transparency and openness to the process," he said.

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