Hospital spending more on PFI debt than on medical supplies

Aerial photo of the NNUH and Norwich Research Park. Picture: Norfolk and Norfolk University Hospital

The Norfolk and Norwich was built in 2001 under a PFI agreement which will not be repaid for another 15 years - Credit: NNUH

A hospital built more than 20 years ago is still paying as much each year to the company which built it as it is spending on medical supplies.

The Norfolk and Norwich University Hospital Trust paid £66m to service its Private Finance Initiative (PFI) commitments in 2019/20, the same amount as on “clinical supplies and services” which includes PPE, lab equipment, surgical tools and hearing aids.

That £66m represents 10pc of the hospital’s operating budget, which puts the N&N’s PFI spend as a proportion of its income among the ten worst hospitals in England.

Norwich South MP Clive Lewis criticised the scheme underlying the payments, describing it as "perpetual profit-gauging".

The modern N&N was built in 2001 by Octagon Healthcare Ltd under one of the first major PFI agreements of the New Labour government.

Under PFI, a firm takes on the costs and risks associated with building large public works and the government repays that investment annually alongside service fees and running costs. 

PFI works like a hire-purchase (HP) agreement, but for hospitals and schools, and keeps the costs of those projects off the government’s balance sheet. However, experts say that, just like HP, PFI ends up costing more over time.

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Official estimates have forecast that taxpayers (through the N&N) will pay Octagon more than £1bn in total - five times the £229m cost of building and opening the hospital - millions of which will go to shareholder dividends which would not have been paid under public sector financing.

And because the annual repayments include £20m-30m in fees for services like cleaning and gardening, and around £30m in leasing and interest payments, the actual debt is only being paid down at around £3m a year.

Meanwhile NNUH spent £66.4m in 2019/20 on clinical supplies and services, which includes PPE, prosthetics, blood, hearing aids and visual aids, surgical instruments, clinical consumables such as dressings and laboratory consumables like sample tubes, as well as the service contracts for maintaining that clinical equipment.

Norwich South MP Clive Lewis spoke at a Westminster Hall Debate and addressed the dental care crisis

Labour MP Clive Lewis argued for the nationalisation of PFI corporate vehicles - Credit: Anthony Kelly

Labour MP Clive Lewis said: "Paying for a new hospital with PFI costs around eight times as much as if the government just paid for it directly, every single pound of which should and could have been spent on care for patients and decent wages for NHS frontline and support staff.

"Governments have the means to halt this perpetual profit-gauging if the political will is there.

"The government can choose to nationalise the companies at the heart of every PFI, the Special Purpose Vehicles, then the NHS can pay the sub-contractors who actually provide the services, saving billions a year until services can be brought back in-house.”

A spokesman for the N&N said that value for money was one of its five commitments in its new five year plan.

“This includes designing and delivering an estates masterplan and agreeing and implementing a ten year lifecycle plan with our PFI operator with effective contract management," he added.

"We have an ongoing cost improvement plan to ensure our services are as efficient as they can be and our organisation is sustainable going forward. We are projected to pay off our PFI in 2037.”

Nationally, no new PFI contracts have been signed since 2018, but the NHS in England is still spending more than £2bn a year paying back debts, with some Trusts spending more on PFI debt than they do on drugs or medical supplies.

An analysis by the New Statesman magazine shows trusts spent a combined £2.14bn in unitary payments in 2019/20 — the latest financial year for which data is published.

Official analysis in 2018 showed the value of the initial PFI investments in the NHS was £12.8bn, but the Department for Health and Social Care will have spent a total £80.7bn once they are all paid off.

This figure includes services such as facilities management and cleaning supplied by the PFI providers or their subcontractors.