PFI debts 'stem from badly drawn up contracts'

17 August 2010

17 August 2010 | Nick Martindale

Poor contract negotiation has been blamed for the high level of debt repayments faced by the UK’s health service across 103 private finance schemes.

Figures initially revealed by the BBC showed the NHS owes a total of £65 billion for new hospitals built under the private finance initiative (PFI), with some health trusts spending as much as 10 per cent of their annual turnover on annual repayments.

Emma Boon, campaign manager at the TaxPayers' Alliance, said: “These seem to have been badly negotiated and this is why the NHS faces these costs. A lot of the costs are hidden and not out there in the open.

“We want to see more transparency about how these contracts have been drawn up and exactly what the process is, so there could be more chance for a bit of competition and better value for the taxpayer.”

The NHS currently pays back £1.25 billion a year but this will rise to £2.3 billion by 2030, with a final payment being made in 2048.

Dr Mark Porter, chairman of the British Medical Association’s consultants’ committee, said: “It is not just the size of the debts involved that causes the NHS problems, but also the inflexibility of repayments.

“Locking the NHS into long-term contracts with the private sector has made entire local health economies more vulnerable to changing conditions. Trusts tied into PFI deals have even less freedom to make business decisions that protect services, making cuts and closures more likely.”

The 103 PFI schemes were initially valued at £11.3 billion when they were built.

But Elizabeth Fells, head of public services policy at the Confederation of British Industry, said comparing the bricks-and-mortar costs of building a hospital under PFI with the long-term costs of maintaining that building over its lifetime was not comparing like with like.

She said: “PFI is not just about building a hospital and walking away. These contracts included the wide range of services needed to support and maintain that building over a 25- to 30-year period, such as cleaning and day-to-day repairs.”

A spokesman for the NHS Confederation added: “PFI has produced lots of hospitals quickly and replaced those that were in desperate need of repair.”

But he warned that having such long-term debt could be problematic in the current environment of handing more power to family doctors.

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