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North east trust becomes first to buy-out of PFI deal

Northumbria Healthcare NHS Foundation Trust has become the first in the country to terminate its private finance initiative (PFI) contract, made possible by a loan from its local council.

The £114m loan from Northumberland County Council will allow the trust to pay off private contractors who built and ran Hexham General Hospital, a consortium called Catalyst, being paid to run it for 32 years.

The deal, approved by the Treasury and Monitor, will save the trust about £3.5m a year. It has been made possible thanks to the borrowing powers which are available to local authorities and will not impact on any other public council resource. 

It was first suggested back in February 2012, when the council’s executive member for corporate resources, Andrew Tebbutt, called it a “win, win, win situation” and said: “The trust is locked into PFI contracts which are costing it a lot of money and one option is to borrow money from the council. It has obvious benefits for the people of Northumberland if we can help them fund their operations more cheaply. The council would earn interest on the loan, it improves healthcare opportunities for people in the county and means the trust doesn’t have to make cutbacks.”

It is expected that the savings made by the trust will be invested back in to frontline services. Jim Mackey, chief executive of Northumbria Healthcare NHS Foundation Trust, said: “We are delighted that we are able to progress this agreement which delivers real value for money for taxpayers and helps save millions of pounds which will be reinvested directly in patient care.”

However, he admitted that without PFI the trust would not have been able to build the Hexham General Hospital a decade ago. “But is down to our excellent partnership approach and working relationship with Northumberland County Council and our strong financial track record that this agreement has now been given the go ahead,” said Mackey. “We will of course continue to explore further innovative ways to bring down borrowing costs as we continue to invest in developing our services.”

Hexham General Hospital was opened in the summer of 2003 and treats thousands of patients every single year. And, over the last decade, Northumbria Healthcare has been working with Northumberland County Council to develop joined up ways of working and deliver better integrated health and social care services.

Dave Ledger, deputy leader of Northumberland County Council, said: “This loan is a result of the very strong and close working arrangements that have existed between Northumberland County Council and Northumbria Healthcare for a number of years, resulting in some of the best examples of integrated health and social care in England.”

But the National Health Action party, which opposes private involvement in the NHS, said the new deal “should not be seen as a solution to the PFI crisis in our NHS”.

Dr Louise Irvine said: “Northumberland found a solution which at least protects their hospital – their local authority has bought out the debt. But this would not be a model for other hospital trusts saddled with PFI debt. In most cases local authorities would have nowhere near the cash required, especially as many of the PFI debts are even bigger than in Northumbria. The headline cost of the Peterborough PFI for example is over £300m.

“What’s more, this type of approach would generate a new postcode lottery depending on the political colour of the council. It also just passes the debt from one public authority to another and the money still comes from taxpayers to pay the extortionate debts of the PFI companies.

“A much better solution that would protect our hospitals would be for the Treasury to take on all the individual PFI debts centrally – amounting to about 2% of the NHS budget – and then use its strong central bargaining power as government to renegotiate the debts down to a fair rate of return.”

A Treasury spokesperson told NHE: “Discussions between the trust and its private partners continue and it would be inappropriate to comment before they have concluded.”

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