How many NHS trusts will Lansley allow to go bust?
The decision not to bailout South London Trust sets a significant precedent.
For the first time since the NHS was founded, a hospital trust (South London) has effectively been declared bankrupt and placed in administration. But who's to blame? Andrew Lansley has already moved to pre-empt a Labour attack by pointing the finger at the "unaffordable" private finance initiative (PFI) deals signed under the last government. For good measure, Ed Balls has responded by noting that the original PFI scheme for the South London Trust was set up under the Major government. All are agreed, then, that PFI is largely to blame. Two of the three hospitals in the trust signed ruinous agreements at a cost of £61m a year, 14.4 per cent of the trust's income. Worse, as former health secretary and Tory MP Stephen Dorrell noted on the Today programme this morning, "agreements were signed that effectively paid private sector cost while the public sector took the risk". PFI firms privatised the profits and socialised the losses.
The other explanation for the trust's woes is that there have long been too many hospitals with too little funding. In the past, financially troubled funds were simply bailed out by other parts of the NHS. But with the health service now required to make unprecedented efficiency savings of £20bn by 2015, that's not an option. The response of Dorrell was to argue that there needs to be "a shift away from overdependence on hospitals into improved care in the community". In other words, hospitals will have to close. For Lansley, this is, to put it mildly, a political headache. There are currently no fewer than 22 NHS trusts at risk of bankruptcy due to unaffordable PFI contracts.
Lansley can argue that the crisis is the result of historic problems but this won't assuage voters furious at the closure of their local hospital. Why, they will inevitably ask, can the government bail-out banks but not hospitals? The problem for the Health Secretary is that he was the one left standing when the music stopped. He must now explain his actions to the voters.