Health Secretary claims PFI deal could put Royal London Hospital at risk of closure

The Royal London Hospital pic: Ellie Baskett

The Royal London Hospital in Tower Hamlets is one of 22 NHS Trusts which could face collapse, according to Health Secretary Andrew Lansley’s claims earlier this week.

Lansley announced that the hospitals could be forced to close because of the hefty unpaid bills forced on them by the private finance initiative (PFI) deals they signed up to under the previous Labour administration. He said: “The truth is that some hospitals have been landed with PFI deals they simply cannot afford.”

The Royal London, which is part of Barts and the London NHS Trust, is an internationally renowned teaching hospital in Tower Hamlets. The Trust signed up to a 42 year PFI deal under Labour and was named by the Department of Health (DoH) this week as being at risk.

A spokesperson at the Trust told ELL that this contradicts the NHS performance data rating, which lists Barts and the London NHS Trust as financially sound.

“Our PFI repayments require the Trust to become one of the most efficient in the NHS and an improvement programme is already well underway. This has focused on achieving higher quality care at lower cost, while protecting vital frontline services.

“It is also crucial to recognise that over the 42 year lifetime of our PFI contract, almost half the costs are associated with vital hospital support services, such as catering, cleaning, maintenance, clinical equipment and sterile services.”

Health Secretary Andrew Lansley

Lansley had accused Labour of leaving the Health Service with an “enormous legacy of debt” before adding: “Labour has brought some parts of the NHS to the brink of financial collapse.”

Labour defended the deals, saying investment was needed “to replace the crumbling and unsafe buildings left behind after years of Tory neglect”.

PFI deals were in fact originally introduced as policy by the Conservatives in the 1990s under John Major, which were then rolled out by then Tony Blair’s government. The deals were meant to fund building projects using private capital, which would then be paid off by the NHS over decades, much like a mortgage.

According to the DoH, repayment figures will rise by 75 per cent over the next 18 years due to inflation, meaning that by 2049 more than £70billion will have been paid by the 103 Trusts which signed up. This compares with the £11.4billion cost of the combined building projects.

Independent commentators are concerned, however, that the furore is a red herring – and that the focus should not be on PFIs and the threat of closures but on how realistically to deal with rising demand for health care against the challenge of high costs and necessary savings.

NHS Confederation chief executive Mike Farrar said: “We are pleased the Government has been up-front with the fact PFI is a problem for many hospitals. But PFI is not the principal cause of the NHS’s financial problems.

“Repayments on PFI debt are likely to be £1.5 billion this year yet by 2014-15 the NHS needs to find savings of £20 billion.

“To address this we need to start looking at the NHS’ big ticket costs such as how we deliver care and where. We need pragmatism and leadership to do this as it will involve some extremely difficult decisions.  A political blame game is a waste of time.”

Professor John Appleby, chief economist at the King’s Fund think-tank, told the BBC that renegotiation of the deals should be tried, although he was doubtful about the ability of Trusts to achieve new deals. “When these deals were negotiated there was more money flowing through the system and the NHS was probably a bit too optimistic about the future,” he said.

The government plans to outline its plans for resolving the problem later this year. Officials will work with the 22 Trust chief executives over the next few weeks to develop crisis options, which could include renegotiating contracts or cost-cutting.


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