Hospital trusts offered £1.5bn emergency fund to pay PFI bills - The Guardian

Seven hospital trusts struggling with crippling private finance initiative debts are to receive £1.5bn in emergency funding from the government to help them avoid cutting patient services to pay their bills.

The Department of Health is making the £1.5bn available – in grants, not loans – to the seven hospital trusts in England with some of the heaviest PFI debts through a "stability" fund. Trusts will be able to use the money to meet PFI repayments, rather than their usual budgets, as long as they meet four conditions set out by the department.

The move will help trusts such as South London Healthcare NHS trust, which is facing a PFI repayment in 2012-13 of £66.8m under the terms of a deal agreed in July 1998, in the early days of Tony Blair's government. They will be able to access the £1.5bn over the next 25 years, until the PFI contracts end.

Andrew Lansley, the health secretary, said he had been forced to use taxpayers' money because certain NHS organisations could no longer afford to honour PFI deals that had been "badly negotiated" by Labour ministers.

"Labour left some parts of the NHS with a dismal legacy of PFI, and made them rely on unworkable plans for the future. They swept these problems under the carpet for a decade and left us with a £60bn postdated PFI cheque to deal with," Lansley said.

"The problems facing some parts of the NHS left to us by Labour now have to be sorted out. Tough solutions may be needed for these problems, but we will not let the sick pay for Labour's debt crisis."

The six other NHS trusts are Barking, Havering and Redbridge; Peterborough and Stamford Hospitals NHS foundation trust; St Helens and Knowsley; North Cumbria; Dartford and Gravesham; and Maidstone and Tunbridge Wells.

Without the fund, there was a danger that services would be put "at severe risk" because of the weight of their PFI deals at a time of tightening NHS budgets, according to Department of Health sources.

South London faces the largest annual repayment in 2012-13. The Barking, Havering and Redbridge trust has to find £49.8m on its deal, agreed in January 2004, and the St Helens and Knowsley trust's payment will be £42.5m under the terms of its contract, signed in June 2006.

Lansley acted after 22 hospital trusts told him their PFI debts were endangering their financial or clinical future. Department of Health research established that PFI payments were one of the reasons for trusts' problems.

The department set four conditions for trusts to use the fund:

• The problems they face must be exceptional and beyond those faced by other organisations.

• The problems must be historic and they have a clear plan to manage their resources in the future.

• They must show they are delivering high levels of annual productivity savings.

• They must deliver clinically viable, high quality services, including delivering low waiting times and other performance measures.

Andy Burnham, the shadow health secretary, who was health secretary during Labour's time in office, has previously admitted in relation to the deals: "We made mistakes. I'm not defending every penstroke of the PFI contracts we signed."

The money will be available over the remaining lifetime of the seven trusts' PFI contracts. It will come from underspends over that time in different Department of Health budgets.

In December a report into NHS finances by the public accounts committee flagged up looming problems with PFI debt. It concluded: "The cost of private finance schemes is an additional challenge for a limited number of hospitals. Analysis commissioned by the department has identified six trusts that are unviable largely because of their PFI charges. Long-term private finance initiatives deals reduce the department's ability to establish a level playing field of financially sustainable, autonomous trusts.

"In many cases efficiency savings alone will not be enough to make unviable trusts financially sustainable. The department faces a particular dilemma about how to manage the debt of these hospitals as their long-term financial commitments make reconfiguration more difficult," it added.