Hospitals need way out of ‘toxic’ NHS mortgages

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The NHS needs to be given a legal right to buy out “toxic” deals hospitals have agreed for new buildings, experts say.

More than 100 schemes were signed off over the past 20 years in England under PFI contracts where private firms paid for new hospitals and centres.

In return, NHS trusts have to make annual repayments like a mortgage.

The Institute for Public Policy Research (IPPR) said some of the fees were extortionate – and with £55bn still owed, action was needed.

Chris Thomas, a health fellow at the think tank, said the worst deals were the equivalent of taking out a mortgage from a “loan shark charging high rates of interest that could not be renegotiated”.

He said while the government had banned the use of PFI in 2018, the NHS was “still left with the toxic legacy of some bad deals with little way out.” Only two trusts are known to have escaped from them.

“The contracts are still driving billions away from patients and into private bank accounts, blocking transformation and threatening even basic safety standards in our hospitals,” added Mr Thomas.

‘Not all deals bad’

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The IPPR said not all the deals were bad, but its research had found some trusts were paying a sixth of their income in fees, with high charges for maintenance and services as well as high rates of interest pushing up costs.

By 2050, £80bn is expected to have been paid in fees for £13bn worth of buildings.

The IPPR wants a legal right to be created to allow the NHS to buy out the contracts at a fair price – similar to the way leaseholders can buy the freeholds for their homes.

One of the trusts that left its PFI – Northumbria Healthcare NHS Trust – managed to save over £3m a year in repayments, reducing its financial liability by a third.

PFI has been used in other parts of the UK for NHS schemes, but not on the scale seen in England.

How could this work?

One of the key problems – even if trusts can get out of the contracts – is financing the buy-out.

Northumbria borrowed money from the local council, but the lower value of that contract and the size of that council made it possible in a way that is not everywhere.

The IPPR said the money to buy out contracts could come from the NHS capital budget – the government has recently announced an increase in this budget, although the think tank said significantly that more would still be needed.

Saffron Cordery, of NHS Providers, said the option to buy out contracts would be welcome – although there were some examples of good-value contracts.

But she said she was not sure the funds would be available to allow this, despite the fact some deals were “badly designed”.

The Department of Health and Social Care said there were no plans to introduce a right-to-buy scheme, but the extra money being invested in the NHS over the coming years would ensure “world-class care” could be delivered.

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