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Northumbria PFI deal not a model for other NHS trusts in financial crisis

The news that Northumbria NHS trust has negotiated a deal that means the local authority will buy out its PFI debt should not be seen as a solution to the PFI crisis in our NHS.

It's reported that Northumbria Healthcare NHS Foundation Trust is about to "secure a £115m loan from the local council, Northumberland county council, to effectively refinance the private finance contract, which was projected to cost the trust £249.1m until the contract expired in 2033" according to business newspaper CityA.M.

"A private finance initiative (PFI) contract was used to build Hexham General Hospital in Northumbria in 2002. Under the terms of the deal, the trust will repay the council for the loan but at the lower public sector rate, which the trust hopes will slash its borrowing costs and save the trust £3.5m a year."

 (Full article at: http://www.cityam.com/article/1402288589/nhs-hospital-trust-verge-ending-private-finance-contract)

Some commentators are saying the deal could be the first of many between councils, the NHS and private investors to end PFI contracts.

But Dr Louise Irvine warns against thinking the Northumbria deal will be a model for other trusts in PFI-induced financial crisis:

Northumbria NHS Trust was saddled with a PFI debt for building Hexham General Hospital that meant crippling repayments rising each year for 32 years. They have this in common with all PFI-funded hospitals: a rising debt to be paid out of an ever shrinking annual budget so that the debt takes a bigger and bigger share of the funds that are meant to be for paying staff and providing front line care. This is destabilising local healthcare economies, forcing cuts to services and hospital closures to save money to pay the PFI debts.

Northumberland Trust found a solution which at least protects their hospital - their local authority has bought out the debt. But this would not be a model for other hospital trusts saddled with PFI debt. In most cases local authorities would have nowhere near the cash required, especially as many of the PFI debts are even bigger than in Northumbria. The headline cost of the Peterborough PFI for example is over £300 million.

What's more, this type of approach would generate a new postcode lottery depending on the political colour of the council. It also just passes the debt from one public authority to another and the money still comes from taxpayers to pay the extortionate debts of the PFI companies.

A much better solution that would protect our hospitals would be for the Treasury to take on all the individual PFI debts centrally - amounting to about 2% of the NHS budget - and then use its strong central bargaining power as government to renegotiate the debts down to a fair rate of return.

This is what the National Health Action Party is demanding of this government or the next. It is a solution to the PFI problem that is practical and fair and would protect NHS services.

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