Final cost of Peterborough City Hospital could be close to £2bn

Peterborough City Hospital, Bretton, Peterborough. Picture: Rowland Hobson/Peterborough ET
Peterborough City Hospital, Bretton, Peterborough. Picture: Rowland Hobson/Peterborough ET
0
Have your say

Soaring Private Finance Initiative (PFI) repayments could see taxpayers footing a bill of almost £2 billion for Peterborough City Hospital - despite it costing just £289 million to build.

The astonishing amount has been confirmed as one of the possible financial nightmares facing Peterborough and Stamford Hospitals NHS Foundation Trust (PSHFT) as it pays for the hospital, in Bretton Gate, over the next 32 years.

Based on a conservative inflation estimate of three per cent over that time, the total amount PSHFT would pay back stands at £1.89 billion.

The trust is expected to pay back £36 million this financial year, but by the time the contract ends that annual repayment would soar to £90 million a year.

Purse-tightening in the NHS has left PSHFT facing a £38 million deficit for this financial year.

Chairman Nigel Hards has previously stated that the PFI repayments are now worth 19 per cent of the trust’s turnover, instead of a more manageable 15 per cent estimate when the contract was signed in 2007.

But Louise Barnett, the interim chief executive at the trust, said that the PFI was the only option to get the hospital built as there was no government funding available at the time.

She also stated that the trust was committed to meeting its financial obligations while protecting patient care.

She said: “The trust has significant financial challenges and we are responsible for taking steps to meet these financial obligations, including our PFI costs.

“We are working with our regulator and healthcare partners to achieve our turnaround plan. We are confident that through our regulator we will receive what we need to deliver the plan.

“The trust has to make significant savings and is absolutely committed to safeguarding quality for our patients.”

John Toomey was the health officer for public sector union Unison when the idea of building the hospital through a PFI was first put forward. He had issued warnings about the long-term implications of the agreement.

But even he was shocked at the levels of repayments and has slammed former trust board members who have left the current board with an unenviable legacy.

He said: “We are absolutely astonished at the extent of the potential increase, which is far greater than even we predicted in around 2003 and 2004.

“We were told at the time by health chiefs that a PFI was ‘the only game in town’, yet now these people have left and the trust has been saddled with these massive repayments.”

Another person who had raised concerns about the PFI prior to it being agreed was Peterborough MP Stewart Jackson, who while thankful that the city has a hospital it can be proud of, has slammed the PFI scheme.

He said: “I think we are just beginning to understand the scale of the financial incompetence around PFI.

“Many contracts, particularly those entered into under the Labour Government, were frankly a rip-off of taxpayers’ money.

“It’s all very well to say they have led to brand-new facilities, but the costs to taxpayers in the long-term is going to be exorbitant.”

Former chairman says trust had no control over PFI

The former chairman of Peterborough’s hospital trust has said his board had little control over the figures in the PFI contract signed for the building of the super hospital.

Dr Clive Morton played a major role in securing a new hospital for the city during his 11-year stint at the trust.

He was present when the PFI contract was signed in July 2007, only for the financial crisis to hit and force NHS trusts to make stringent cuts.

Dr Morton said: “I can’t comment on projections of the PFI cost because the situation has moved on enormously and the contract was prescribed by the private financial unit of the Government and we had no control over the figures.

“The current board is experiencing a very different set of circumstances than originally envisaged when the schemes were proposed.”

But John Toomey, former health officer for union Unison, has called into question Dr Morton’s claim about who decided the PFI figures.

He said: “When the hospital first became a trust the board said that this would give it control over the way it spent its money, and as such the former board should be held wholly responsible for the situation as it is now.”

Payments

THE hospital trust will have to make annual repayments on its 32-year PFI contract based on a conservative estimate of three per cent Retail Price Index (RPI) inflation each year.

The following figures show what the annual repayment figures could be at some landmark dates in the 32-year repayment plan:

• Year 1 (2011/12): £36m

• By Year 5: £40.5m

• By Year 10: £46.97m

• By Year 15: £54.45m

• By Year 20: £63.123m

• By Year 25: £73.18m

• By Year 30: £84.83m

• By Year 32: £90m

The current RPI rate is at 5.2 per cent so the use of three per cent serves to take into account any future fluctuations. The Government announced in 2010 that NHS funding would increase, but only by 0.4 per cent.

It is thought the schemes could cost the NHS up to £20bn more than if PFI had not been used. Health Secretary, Andrew Lansley has said some trusts may get support to cope with spiralling debts.

FACTFILE: Peterborough City Hospital (PCH)

- Construction work started on PCH in July 2007, after the PFI contract funding the project was approved by the Government.

- The hospital opened to patients for the first time in November 2010, becoming fully operational during December.

- The hospital trust had to take a transitional payment of £10 million from the East of England Strategic Health Authority earlier than anticipated to stop it being in deficit at the end of the 2010/11 financial year.

- The trust is now predicting a £38 million deficit for 2011/12 and is currently formulating a £12 million savings plan for this year.

FACTFILE: Private Finance Initiatives (PFI)

- PFIs in the NHS came to the forefront last week when health secretary Andrew Lansley named 22 hospital trusts as risk of collapse as a result of PFIs - although surprisingly, Peterborough was not one of them.

- PFIs sees public and private sectors working together on major infrastructure projects, with the private sector financing the work, which the Government then pays back over a long time period with interest.

- Payments from PSHFT go to Progress Health, who in turn make payments to the companies who financed the hospital’s building and development.