News / Fresh attack on PFI costs in health

The study, by Mark Hellowell and Allyson Pollock, respectively, fellow and head of the university's centre for international public health policy, said in 2005/06 the NHS made payments totalling £470m to PFI consortia. Eighty-five deals have been signed, but 41 further projects are planned by 2013/14. The researchers claimed that by that time the NHS would be making annual payments of £2.3bn to the private sector. The amount to be repaid would almost double from £50bn in 2005/06 to more than £90bn in 2013/14.

PFI schemes had financial shortfalls that contributed to deficits, they said. The average capital costs for a PFI scheme were 8.3% of trust income, but the tariff includes an element for capital costs equal to just 5.8%. Large or multiple schemes had an even bigger gap – schemes valued at more than £50m had average capital costs of 10.2% of income, the report claimed.

‘This underfunding has created serious financial difficulties for many trusts, which can only be reconciled by further service reductions,’ the report said. However, the report was dismissed by Business Services Assocation, the policy forum that represents most PFI service providers.

‘The financial assumptions on which the report’s statistics are based are fundamentally unsound,’ said deputy director-general Val Hiscock. ‘They are based on assessments from 2005/06, the year when the new NHS tariffs were introduced, and take no account of the dramatic improvement in the financial performance of many trusts that has taken place since then.

‘In fact, the latest official bulletins on NHS finances forecast surpluses this year for the majority of PFI hospitals now in operation, and there is no real evidence to support claims that PFI payments are associated with service cuts in any area of the NHS.’

A recent report by credit rating agency Standard & Poor’s estimated the adoption of international financial reporting standards in April 2008 would cost the NHS up to £280m in annual capital charges. It is believed the new standards will bring most PFI schemes on to the public-sector balance sheet. Trusts with on-balance sheet PFIs would have to pay capital charges to the Treasury.

The HFMA’s Policy Forum, which will be held in Cardiff on 2 November, will discuss the issue of capital financing across the UK health services.