The costs of repaying the PFI debt and of paying for the expensive PFI hospital maintenance and service contracts are one of the causes of the Calderdale and Huddersfield hospital Trust’s finance problems.
PFI costs, funding shortage and Strategic Review of future of NHS and social care
Shortage of funding is behind the proposed closure of Calderdale A&E and at least 100 acute hospital beds, and their replacement by a new system of care in the community that is based on an American private health care system used by a company called Kaiser Permanente.
The downloadable CHFT Annual Report 2012-13 makes no bones about this. Referring to the Health and Social Care Act 2012, which kicked in on 1st April 2013, The Chairman’s statement says that the Trust is preparing for:
“one of the biggest reorganisations ever to affect the NHS…Looking ahead to next year, there is no doubt the financial challenges will deepen as austerity measures impact across public sector services…Really important in this context is the work going on across the health economy to redesign the way health and social care is provided in Calderdale and Kirklees.”
The Directors’ Report makes several more references to shortages of funding and the need to make savings.
Given this pretty dire situation, I thought it would be good to know how much money is sucked straight out of CHFT into the coffers of the banks and equity companies that hold the PFI debt.
According to a 2012 Treasury PFI Spreadsheet, paying off the PFI debt means that CHFT has to cough up repayments that will cost around £773m and only be paid off in 2031/32. The repayments are called a Unitary Charge. This is made up of “mortgage” payments on the building – although it’s not really a mortgage because at the end of the contract ownership will not transfer to CHFT – and service charges for various aspects of operating the building. (See row 363 in the downloadable pfi current projects list march 2012 (.xls file).)
All this for a building whose current net book value in the 2012/13 CHFT Accounts is £79.473m and which cost £64.6m to build.
The Jubilee Debt Campaign calculates that over 30 years, £312 million has to be paid to cover the PFI debt and interest costs. If the money had been borrowed publicly, it would have cost an estimated £127 million. So the hospital will cost £185 million more than it should have done – enough for another one and a half hospitals.
CHFT won’t say if the PFI capital payment is higher than NHS England’s tariff allocation for capital costs in respect of Calderdale Royal Hospital
I asked CHFT whether the PFI capital payment was higher than the CHFT tariff allocation for capital costs in respect of CRH. (The tariff allocation for capital costs is the amount of money NHS England pays to cover the capital costs of buildings etc.)
Generally, PFI capital costs are higher than the NHS England tariff allocation for capital costs.
“There is no direct correlation between the PFI capital payment and the tariff allocation. The tariff does not differentiate between NHS funded capital and PFI schemes. Tariffs are a complex area and are calculated on a national average of all provider/trust costs which take into account a range of factors.”
This doesn’t answer my question. I knew there isn’t a direct correlation, that’s why I asked what the difference is. Because if the PFI capital payment is higher than the amount that NHS England pays for capital costs of the CRH building, then CHFT is out of pocket and the difference has to come from somewhere.
I asked: if CHFT does have to make up a capital costs shortfall ( ie if the PFI capital payment was higher than the NHS England tariff allocation to CHFT for capital costs), whether this in any way endangered patient safety or reduced the Trust’s ability to provide optimal patient care.
The CHFT said that, as with all costs, the costs of PFI are factored into all areas of service delivery. Which again doesn’t answer my question.
Calderdale Royal Hospital PFI facts and figures
CHFT told Plain Speaker that the Calderdale Royal Hospital PFI contract is for 60 years with a break clause at 30 years, with early termination fees due at that point in time.
Craig Whittaker MP said that at a briefing with the Trust’s Chief Executive, he learned that the early termination fee would be £22m.
The break clause could be exercised in 2031 but before this decision is made, extensive detailed planning would be required to understand the implications both in service and financial terms. Craig Whittaker said that this would need to be done by 2029.
Although the contract is for 60 years, the repayment period for the PFI finance (capital and interest) is 30 years.
On the basis of the figures in this table, the annual PFI cost for 2012-13 was:
- Interest cost on PFI debt £10.464m
- Principal repayment £1.312m
- PFI Service Charge £10.541m
- Total £22.317m
I asked CHFT how the PFI Service Charge breaks down into the facilities management fee and the longer term maintenance fee, but CHFT said this info is commercially confidential.
There seem to be discrepancies between the Treasury PFI spreadsheet and CHFT accounts
When I added up all the annual Calderdale Royal Hospital PFI repayments listed in the Treasury PFI spreadsheet, up to and including 2012/13, this gives total repayments of £232.3m since the first year of repayment in 2001/2.
This leaves an outstanding balance of £430.9 to be repaid by 2031-32, the last year where a repayment is due.
This contrasts with £312.216m gross liabilities (row 4 in the table above).
In case this post provokes a fresh burst of party political sniping and blame gaming about which political party is responsible for the CRH PFI contract and debt, please note that CHFT started the process of entering into the PFI contract when the Tory Major government was in power and completed it when the New Labour Blair government had come in.
Updated 18 April with information from CHFT
Updated 10 Feb 2017 with info from Jubilee Debt Campaign.