A Yorkshire hospital trust is considering ending its ‘ruinous’ Private Finance Initiative deal half-way through the agreed 60-year term, meaning it will have to pay out an extra £40m.
Calderdale and Huddersfield NHS Foundation Trust is one of five hospital trusts in the region committed to paying a total of £3.8bn as a result of ‘buy now, pay later’ contracts financed with the help of PFI, The Yorkshire Post revealed on Saturday.
The trust, which is working to eliminate a £27m annual deficit, paid more than £25m last year as part of the agreement made in the 1990s to build Calderdale Royal Hospital in Halifax.
An open letter by local Labour MPs Barry Sheerman, Paula Sherriff, Thelma Walker and Tracy Brabin sent last month to the trust said its current financial problems could partly be attributed to the ‘ruinous’ 60-year deal.
As part of the contract, a break clause means it can be ended at 30, 40 or 50 years, or outside those times if the trust was willing to pay a £200m penalty.
The trust recently revealed plans to demolish nearby Huddersfield Royal Infirmary and replace the hospital with a smaller site without an A&E department, in a move it says will save the NHS £175m.
Officials have now told The Yorkshire Post that the ‘full business case’ for this scheme is based on using the break clause in its first PFI contract in 2031, meaning it will end 30 years earlier than originally planned.
By doing this, the trust will be contractually obliged to pay an extra £40.3m, bringing its total spend on the PFI contract to an estimated £740m.
Director of finance Gary Boothby said it would only be allowed to do this if the plan is approved by regulators and the trust board, meaning it will have to carry out a ‘value for money assessment’.
He said: “Enacting the break clause does not change the interest value associated with the PFI as the trust will have repaid the debt associated with the building by year 30.
“In enacting the break clause the trust would no longer pay the PFI partner for the provision of hard, soft FM along with lifecycle costs for the maintenance of the building which the trust would then be responsible for.”
Colne Valley MP Thelma Walker, who was elected this summer, said the hospital trust still owes £425m on the original PFI loan for Calderdale Royal Hospital.
She said: “Such PFI payments put an incredible strain on our services both locally and nationwide.
“Lack of ability to invest in the health service is felt by NHS staff right through the organisation and is in fact most acutely felt by the staff on the front line.
“The nurses, doctors and support staff of our hospitals, clinics and other health services provide the best care they can with the resources they have available.
“However, the pressure they are facing has a knock-on effect to the care levels experienced by patients.” She added: “It is the duty of our Government to step in to fund and resource our health and social care services.
“For a number of years interest rates have been at an all-time low, now is the time for the Government to borrow and invest in our health and public services.
“There is very limited debate about alternative methods of borrowing for investment and managing our major public assets.
“It is a relatively short term investment in what is the long-term profit, not for bankers and investors but for the health and well-being of every person in our country, cradle to grave. Our NHS is for the many not the few.”