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HEALTH-EQUITY-NETWORK  August 2010

HEALTH-EQUITY-NETWORK August 2010

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Subject:

Re: Fears over £65bn 'NHS mortgage'

From:

Martin Rathfelder <[log in to unmask]>

Reply-To:

Martin Rathfelder <[log in to unmask]>

Date:

Fri, 13 Aug 2010 20:26:46 +0100

Content-Type:

text/plain

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text/plain (215 lines)

  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.
>
> http://www.smf.co.uk/do-hospitals-need-to-own-their-buildings.html
>
> 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 
> 11.3bn.
>
> 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.
>
> **Squeezed**
>
> 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
>       payments.
>     * **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".
>
> http://www.bbc.co.uk/news/health-10882522
>
>
>
>
> -- 
> Mike Hughes
> Horsforth Modern Art
> 2 Back Lane
> Horsforth
> Leeds
> West Yorkshire
> LS18 4RF
>
> 0113 3188845
> 07908 726204
> www.horsforthmodernart.co.uk <http://www.horsforthmodernart.co.uk>
>
> ------------------------------------------------------------------------
> The NHS Confederation
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> This communication contains information which is confidential and may 
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-- 
Martin Rathfelder
Director
Socialist Health Association
22 Blair Road
Manchester
M16 8NS
0161 286 1926
www.sochealth.co.uk

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