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NHS saddled with £65 billion PFI mortgage

Published 13 August 2010

Burden of repayments puts trusts in real financial difficulty.

The NHS in England faces a huge bill for hospitals built under PFI contracts, a BBC investigation has revealed.

Although the cost of building work was just £11.3 billion, the way the repayments are structured and the cost of maintenance means that trust will end up having to pay back around £65 billion over the course of the next 30 years or so.

This will make it difficult for savings and efficiencies to be made in the service, according to economists. In some trusts repayments will take up as much as 10% of the total budget.

Although the government insists the schemes offer 'value for money', there is concern among industry experts that these fixed contracts leave NHS trust with their hands tied in terms of future spending decisions, meaning the possibility of cuts and closures in the future.

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9 comments from readers

tim
13 August 2010 at 09:19

At long last !!.

Anyone who thought about the NHS hosiptal building project knew what was happening. Brown's baby will cripple the NHS for decades and we will still be paying for it when the buildings are falling to pieces.

To avoid having to declare the expenditure Brown made everyone go down the PFI route and take the debt "off-balance sheet", it never made economic sense it was to con the public.

The NHS was not safe in Labour's hands - it was bankrupted by Labour. Yet another thing for the leadership candidates to now declare they were totally against when they were in office.

Caroline
13 August 2010 at 12:56

65bn between how many hospitals/trusts? 65bn over 30 years = 2bn per year so between how many hospitals trusts is quite relevant. Or are you saying its 65bn per year for every hospital/trust?

Also, what is the budget which it would represent 10% of?

tim
13 August 2010 at 13:05

Caroline - it is 10% of the current budget spread over all Truts, so some will have very little additonal cost because of this but potentially some could have 15-20% of their income taken up with the repayments

Steve
13 August 2010 at 14:52

its not just the Hospitals, its the schools, the roads, the prisons everything was build by PFI what about the costs of these. Will the BBC try to find the true costs of what the bankers and the financiers of the projects are going to make of the british tax payer over the next 30 years?

Abby
13 August 2010 at 19:49

If you purchase a house on a mortgage, are re-payments not spread over, between 25-30 years?, so whats new?

Some people just like being alarmist unnecessarily and one those not have to be a spiritualist to know their political alignments

Freeman
14 August 2010 at 19:48

I can't believe there are actually people on here defending the PFI scam. Surely they can't all be Tories.

Richard
15 August 2010 at 10:04

I can't believe there are people who think this is a bad deal.

Look at the value not the price.

2bn per year and that includes the maintenance and running of over 200 new modern buildings.

After 30 years they becomes a state owned assets. Deduct the taxes paid by the construction workers and the business tax of the companies/suppliers. Deduct the local spend and the mortgages paid by those employed in the build and running. Take into account the improvements in services. Look at the life cycle costs of running a more efficient and better insulated more cost effective building.

Now tell me you would rather have the old cottage hospitals back with the leaking roofs and patients wheeled across fields from the operating theatre to the wards.

Tell me you want to remove all the modern equipment and clinics. Tell me that you would prefer to have paid in one year the full cost.

Show me anyone who can buy a new house with all the costs and refurbishment rolled up over 30 years for less than 10% of their in come per annum.

Joe Public
16 August 2010 at 08:44

People forget what PFI was intended for:

Big, capital projects with a relatively high level of uncertainty and risk - such that it would be unacceptable to leave the taxpayer with the bag if things went sour.

The epitome of PFI was the Channel Tunnel. A risky venture, as the scale of engineering work was in uncharted territory, with enormous cost. The govt of the time set it up as a PFI scheme - so that the private sector, in the form of Euro Tunnel, would finance and oversee the construction. Investors were attracted as the venture looked attractive at the time.

As it was, the project went massively over budget and was completed late. Euro Tunnel collapsed and the investors took a massive haircut on their investment. However, taxpayers were protected from the spiralling costs, which was one of the key drivers for selecting PFI for this project.

For more conventional infrastructure and state operations, PFI is less suitable due to the higher costs and lower control, which are not outweighed by the risks of the projects. E.g. building a school or hospital is not a high risk project - projects on this scale can be managed fairly easily and the costs predicted accurately.

The problem has been a breathtaking level of misuse of PFI for low-risk projects, which can be more cheaply and more effectively provided by conventional government procurement. And, most galling of all, the bailing out of bust PFI private sector firms because their projects collapsed due to financial mismanagement. Not only had the tax payer paid a high price so that the private sector could take the project risks, Gordon simply took the risk back when things went bad - completely undermining the whole point of PFI.

Lets put Labours use of PFI into perspective shall we?

On Gordon Browns orders, the government, up to 2007 signed more than 750 public sector deals with private companies under PFI.

Including:

64 out of 68 hospitals in Browns first 8 years as chancellor. As were 230 new schools, 185 new hospitals, health centres, 43 roads and bridges

It was PFI which enabled Brown to keep public borrowing below 40% of GDP.

[An acccounting fiddle. Enabled him to keep infastrusture spending off the governments 'current' account books.]

Debt acrued by 2007, owed by government to private companies was in excess of £55Billion. [All basically hidden]

Many roads and bridges which were owned, ALREADY paid for by the taxpayer, prior to Browns stint as chancellor were then sold off to private companies, on the quiet, who now charge us for using them.

Point being Brown, as chancellor, using PFI has spent all the money, was selling off the family silver, on purpose, knew what he was doing, and it still has not even begun to be repaid.

The bankers who financed these deals walked away with absurd profits.

[One group of Bankers walked away from one PFI deal with 662% profit]

PFI is a perfect facist tool. Everyone wins except the populace. It is a sign of a facist government when government and business are merged in such a way.

The bankers outwitted Brown the Clown at every opportunity.

The equity in the rebuilding of the M40 has been sold at least five times. With different building contractors making huge profits. One company sold a prison for six times what it had paid.

Brown just let it continue......

By the time Brown stopped being Chancellor he had lumbered £54billion in debt just for the cost of buildings onto the taxpayer.

[In reality, to repay that debt will be closer to £160Billion]

Governments can always borrow money more cheaply than private companies. If Gordon Brown had haf a brain he would know that by allowing private companies to borrow money on his behalf, all he did was increase the cost to taxpayers.

Brown was also a fan of PPP Public private partnerships.

Brown supported metronet, the ppp london tube project. Against advice.

In july 2007 the development had to call in an administrator. Taxpayers paid the £2billion over run and the £2.6 billion debt and administrators bill.

Under Brown, [as opposed to the Tories] PFI became a £4bllion a year industry. [Look at companies like Conaught plc, who service council houses, whose share price has now been wiped out last month or so.]

If Brown was in business he would have been bankrupt in months.

PFI was just a massive hire purchase scheme which allowed brown to keep public spending, mainly infastructure off the books. AKA Fraud.

And acrue debt, to be passed onto the next governmnet. It makes you think, it must have been Labours plan all along.

The only people who made money out of this were the bankers and financiers.

The taxpayer got royally screwed.

He was like Nick Leeson. Brown got in way over his head, was seduced by the slick way PFI enabled him to be careless with other peoples money, whilst lying out of his ****

Just the Interest on the debt alone, will cost the UK close to £50 Billion, this coming tax year.

Dave
18 August 2010 at 10:45