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19
Oct

CHPI report analyses the “toxic legacy” of PFI


15% of NHS Trusts with a PFI could terminate the contract due to poor performance, a new report published by the Centre for Health and the Public Interest (CHPI) claims. 

 

In addition, excess interest and inflation payments on PFI debts have cost Trusts £1.3bn over the three years from 2014/15 to 2016/17. In 2016/17 alone these excess PFI interest and inflation costs would have reduced the Trusts’ overall deficit by 30% if they had been paid centrally instead.

 

‘Dealing with the legacy of PFI – options for policymakers’ analyses five options available to policy makers to address problems caused by existing PFI schemes. For each option, it quantifies its impact and assesses its advantages, disadvantages, and feasibility.

 

PFI has been used to build 127 NHS hospitals and facilities but has locked the NHS into 25-30 year contracts paying back debt at very high interest rates while generating high profits for the companies involved. Because individual NHS Trusts bear this debt burden, many have been pushed into financial deficits – with money meant for patient care instead going to PFI lenders and investors.

 

Over £831 million has already extracted from the NHS in the form of PFI profits with a further £1 billion expected to leak out by 2021.

 

The CHPI says that dealing with what it terms “this toxic legacy of high cost debt” is a big challenge. Finance was provided by the City for these deals on the basis that the NHS would continue to pay back the money borrowed no matter what. The contracts require the taxpayer to pay huge compensation if they are terminated or bought out and investors know they are well protected by the contracts that they signed.

 

As a result, government must use all the tools at its disposal to reduce the financial burden of PFI and release much needed money for NHS care.

 

The CHPI report analyses five options for policy makers:

* Enhance the monitoring and enforcement of PFI contracts

* Centralise the PFI debt to remove the burden from NHS Trusts

* Tax the profits of PFI companies

* Terminate or buy-out PFI contracts

* Nationalise the PFI companies in order to renegotiate the debt. 

 

The report was written by Vivek Kotecha and Dr Mark Hellowell. Vivek Kotecha is CHPI’s Research Officer, previously employed by NHS Improvement, analysing and reporting on the operational and financial performance of the provider sector. Dr Mark Hellowell is a Lecturer in Global Health Policy at the University of Edinburgh.

 

Click here to download the full report.

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