Leeds hospital bosses consider ‘buy now, pay later’ PFI contract a decade after £1bn deal

30 september 2008.'The Bexley Wing at St James's Hospital, Leeds.'Yorkshire Cancer Centre.
30 september 2008.'The Bexley Wing at St James's Hospital, Leeds.'Yorkshire Cancer Centre.
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Leeds’ hospital trust says it is considering using the controversial PFI scheme to pay for new buildings more than a decade after signing similar deals which will cost in excess of £1bn over 30 years.

Government figures show Leeds Teaching Hospitals NHS Trust paid £33.6 million last year as part of Private Finance Initiative contracts to build the Bexley Wing at St James’s Hospital and Wharfedale Hospital in Otley.

PFI charges represent only a small proportion of the trust’s overall costs given the turnover of the trust is in excess of £1bn.

A hospital trust spokeswoman

Around Yorkshire, five hospital trusts have signed PFI deals, where private firms take on the costs of major building projects and are paid back over several decades, at a total cost of £3.8bn to tax-payers. A former Yorkshire MP and ex-chairman of the health select committee has called the costs associated with one local trust’s PFI deal as “nothing short of scandalous”.

In Leeds, the deals for the Bexley Wing and Wharfedale were signed in 2004 and 2002 respectively. The total capital cost of the buildings is £237m but over 30 years, £1.016bn will be paid back.

The original funding for the Bexley Wing part of the scheme came from the Treasury, making the contract one of only two health PFIs to be funded in this way.

Earlier this year the project was refinanced via a £261m bond issued by the insurance company Assured Guarantee.

According to advisor Bevan Brittan, the renegotiation means nearly £2 million annually can be saved over the lifetime of the agreement and the trust can now build a £3 million specialist clinical trials centre. at St James’s Hospital.

The trust says the overall unitary charge for its PFI deals will be £32.2 million for this financial year, a cost which includes repayment of the original capital, interest, maintenance and other expenses.

A spokeswoman said: “PFI charges represent only a small proportion of the trust’s overall costs given the turnover of the trust is in excess of £1bn.

“The business case for each project included a value for money assessment which took account of the risk transferred to the private sector under a PFI contract arrangement.”

She added: “The trust is in the process of developing a business case for ‘Building the Leeds Way’ which will be a significant development including new build and some refurbished accommodation.

“A number of options for funding including potentially PFI will need to be considered within the business case.”

Last month, the YEP revealed the £3bn cost of contracts signed by Leeds council bosses to construct and maintain new schools, homes and waste facilities paid for with PFI.

Critics argue that PFI, which became widespread after Labour took power in 1997, is more expensive than simply borrowing.

But supporters say the contracts bring many benefits, with the private contractor taking on the risks involved and providing maintenance and management of the new building.

Looking back to the 1950s and 60s, David Hinchliffe can recall visiting the old Pinderfields hospital in Wakefield, where his father was being treated in huts built for World War Two casualties.

Four decades later, the then-Wakefield MP and chairman of the Parliamentary health select committee saw his daughter being treated for appendicitis in the very same huts.

He was among those who campaigned for a new hospital to serve the city, and warmly welcomed the news in 2001 that the Labour Government of the time was to provide just that.

But fast-forward 16 years, the now-retired Mr Hinchliffe, who at the time questioned the use of PFI to finance the hospital’s construction, believes the costs of the ‘buy now, pay later’ scheme have become an albatross around the necks of NHS bosses.

The state-of-the art Pinderfields hospital was officially opened by the Princess Royal in 2011, while the new Pontefract Hospital, also paid for under PFI, was opened by the Duke of Gloucester in July 2010.

As part of the deal signed with Consort Healthcare, Mid-Yorkshire’s hospital trust will pay £1.61bn over 35 years, including £38.8m last year, for buildings with a capital value of £312m.

Describing the cost of the scheme as “nothing short of scandalous”, Mr Hinchliffe told the YEP: “In my view, there should have been much more vigorous efforts by them and local MPs to press nationally for a renegotiation of the debt repayment arrangements.”

During his spell as chairman of the health select committee, Mr Hinchliffe recruited Professor Allyson Pollock, a strong critic of PFI, as an advisor. But he said his wish to involve her on a report about PFI was blocked by ‘loyalist’ Labour MPs who had been appointed to the committee.