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19.10.18

One in six trusts could end PFI contracts due to poor performance as NHS heads for £1bn loss

A new report has revealed that 15% of all NHS trusts using private finance initiatives (PFI) could terminate contracts due to poor performance.

The report, released by the Centre for Health and the Public Interest (CHPI), has analysed five possible ways of dealing with the problems caused by PFI schemes.

As previously indicated by the organisation, trusts were £1.3bn out of pocket over the three years from 2014-15 to 2016-17 due to excess interest and inflation payments on PFI debts. In 2016-17 alone, these costs would have reduce trusts’ overall deficit by 30% if they’d paid centrally instead.

Although PFI has been used to build 127 hospitals and facilities, the CHPI argues that it has locked the NHS into lengthy contracts with high interest rates, generating over £831m in profit for companies involved – with a further £1bn expected to be made by 2021.

The think tank said that dealing with this “toxic legacy of high-cost debt” is a big challenge facing the NHS, as investors know they are protected by the contracts; contracts, the report says, which see the taxpayer fork out compensation if they are terminated or bought out.

The CHPI urged the government to “use all the tools at its disposal” to reduce the impact of PFI and highlighted five options to do so.

Policymakers could deal with PFI by enhancing the monitoring of contracts; centralising the PFI debt so NHS trusts are not burdened; taxing PFI profits; terminating or buying out contracts; and/or nationalising PFI companies to renegotiate the debts.

The report analyses the pros and cons of each of these options, weighing up their value for money, financial burden, feasibility and other advantages and disadvantages.

In the Sep/Oct 2017 edition of NHE, Vivek Kotecha, research officer at the CHPI, analysed the lessons learned from PFI in the NHS so that the health service avoids repeating the same mistakes.

Top image: jax10289

 

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