Soaring PFI hospital costs are threatening NHS services

13 Sep 07
The annual costs to the NHS of Private Finance Initiative schemes will soar fivefold from £470m to £2.3bn over the next eight years and could damage services, Edinburgh University researchers claim.

14 September 2007

The annual costs to the NHS of Private Finance Initiative schemes will soar fivefold from £470m to £2.3bn over the next eight years and could damage services, Edinburgh University researchers claim.

A report from the Centre for International Public Health Policy, published on September 11, warns that as more schemes come to fruition, the rising costs will increase budget deficits and lead to service cuts.

The capital allowance that NHS trusts receive is insufficient to cover the high charges associated with PFI schemes, the report says. It concludes that trusts signed up to PFI schemes currently face an average income shortfall of 4.4% in meeting these payments. As PFI schemes proliferate, the financial problems will grow.

Report author Mark Hellowell warned: 'The payments to PFI consortiums are an albatross for the NHS and are associated with service cuts. As the PFI programme expands, the problems will become even more acute.'

The Edinburgh study was released the same day as a report from the Northern Ireland Audit Office, which showed that the province's Department of Education had lost £4.2m by transferring surplus land to contractors under PFI schemes. The assets had been routinely undervalued, the auditors found.

Arrangements for clawing back a share of developers' subsequent profits were 'not fully effective', the NIAO said. On the Balmoral school project in Belfast, the contractor sold the land for £3.8m but offered just £13,000 back. This was later increased to £793,000.

The NIAO, which examined five PFI contracts for six schools, said surplus land should in future be included in PFI projects only where there was a clear public benefit. Such assets should be valued at least twice, it added.

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