Given there are few potential purchasers for second hand hospitals,
how do you value the asset at the end of the term?
On 13/08/10 14:32, Joe Farrington-Douglas wrote:
> “I'm not sure it requires a health economist to work out the
> implications for an assetless NHS in 2020 and beyond”
> Actually health economics probably would help answer this question.
> It’s not that far out.
> Just putting it out there for interest.
> *From:* The Health Equity Network (HEN)
> [mailto:[log in to unmask]] *On Behalf Of *Adam Oliver
> *Sent:* 13 August 2010 14:27
> *To:* [log in to unmask]
> *Subject:* Re: Fears over £65bn 'NHS mortgage'
> I think it's like an interest only mortgage, which people tend to buy
> when they want to borrow beyond their means. I tried to find out what
> would happen to the hospitals at the end of their leases once, but not
> much thought seemed to have gone into it. Perhaps the govt could
> negotiate a token payment for purchase at the end of the lease, a bit
> like the bike scheme that many companies run?
> *From: *Mike Hughes <[log in to unmask]>
> *Sender: *"The Health Equity Network (HEN)"
> <[log in to unmask]>
> *Date: *Fri, 13 Aug 2010 14:05:31 +0100
> *To: *<[log in to unmask]>
> *ReplyTo: *Mike Hughes <[log in to unmask]>
> *Subject: *Re: Fears over 65bn 'NHS mortgage'
> There'sdanger in applying micro enomic analogies in the public policy
> field. And this falls fowl of most and therfore misses the most
> distressing point about PFI. PFI isn't a mortgage it's a lease so at
> the end of the term the NHS has nothing other than a first option on
> purchasing the building it has been paying for for twenty years!
> So this is not like pushing out the boat to secure a property on the
> basis that income will rise and the property will also gain
> substantial value (for most of us this has been a sound strategy in
> our lives). PFI is like agreeing to rent property for twenty years
> when you could have taken out a mortgage to buy it, and paying more in
> service charges than you need to, and still being faced with the need
> for a property at the end of the lease agreement.
> Remember PFI was a way of getting round Maastricht's restrictions on
> public sector borrowing. Didn't John Prescott think it up? I'm not
> sure it requires a health economist to work out the implications foran
> assetless NHS in 2020 and beyond.....
> On Fri, Aug 13, 2010 at 10:07 AM, alex scott-samuel
> <[log in to unmask]
> <mailto:[log in to unmask]>> wrote:
> 13 August 2010 Last updated at 01:22
> *Fears over 65bn 'NHS mortgage'*
> By Nick Triggle Health reporter, BBC News
> The NHS in England faces a total bill of 65bn for new hospitals built
> under the private finance initiative (PFI), figures obtained by the
> BBC indicate.
> The so-called "NHS mortgage" means that for some trusts annual
> repayments take up more than 10% of their turnover.
> Economists said the fees, which rise each year, would make it harder
> to achieve savings while doctors said they would mean less money for
> patient care.
> But the government said the 103 schemes were providing value for money.
> Under the schemes, private firms pay for and build new hospitals and
> mental health units, leaving the NHS to pay off what is effectively
> its mortgage over a period of 30 or so years.
> The data shows that the value of the projects when they were built was
> However, over the lifetime of the deals, the NHS is due to pay back
> 65.1bn, once extra costs such as maintenance, cleaning and catering
> are taken into account.
> The figures also reveal the levels of repayments are rising. In total,
> the NHS currently pays back 1.25bn each year - a figure which rises
> year-on-year until 2030 when it will top 2.3bn. The final payment will
> not be made until 2048.
> The situation has prompted calls for the NHS to try to renegotiate the
> deals to help it cope during the squeeze on public spending and with
> the emphasis now on moving care out of hospitals and into the community.
> While the NHS budget is being protected, the health service has still
> been told to find up to 20bn of savings by 2014 to help it cope with
> pressures from the ageing population, the rising price of drugs and
> lifestyle changes such as obesity.
> Professor John Appleby, chief economist at the King's Fund health
> think-tank, said: "It is a bit like taking out a pretty big mortgage
> in the expectation your income is going to rise, but the NHS is facing
> a period where that is not going to happen.
> "Money is being squeezed and the size of the repayments will make it
> harder for some to make the savings it needs to. I don't see why the
> NHS can't go back to its lenders to renegotiate the deals, just as we
> would with our own mortgages."
> Dr Mark Porter, of the British Medical Association, added: "Locking
> the NHS into long-term contracts with the private sector has made
> entire local health economies more vulnerable to changing conditions.
> "Now the financial crisis has changed conditions beyond recognition,
> so trusts tied into PFI deals have even less freedom to make business
> decisions that protect services, making cuts and closures more likely."
> Nigel Edwards, director of policy at the NHS Confederation, which
> represents trusts, accepted there was a problem.
> "They were planned for a different world. I'm sure that in some cases
> people feel their hands are tied."
> But a Department of Health spokeswoman said the schemes were providing
> "value for money" and were "affordable".
> She added: "All trusts, not just those with PFI contracts, will need
> to deliver significant efficiencies over the coming years in order to
> meet rapidly rising demands while protecting front-line services.
> "One of the benefits of PFI is that the buildings are always
> contractually required to be kept in good condition - good maintenance
> will always cost more than not maintaining facilities to a high standard.
> *The burden of PFIs*
> * **Coventry**** and Warwickshire NHS Trust** - Currently spending
> almost 15% of its income on its PFI project. Chief executive
> Andrew Hardy says the trust is already looking to reduce its
> * **South London**** Healthcare NHS Trust** - Has major PFI
> projects in Bromley and Woolwich. Spending 13% of income on
> repaying debt. Trust says there are "undoubtedly some
> constraints from having these fixed costs".
> * **Dudley**** NHS Trust** - Bosses say they are looking for
> "innovative" ways to reduce the PFI bill, which now accounts for
> 13% of turnover.
> * **Buckinghamshire NHS Trust** - Three hospitals developed under
> PFI. Trust admits repayments "impact on the ease at which we can
> make savings".
> Mike Hughes
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