Lord Harries of Pentregarth
To ask Her Majesty’s Government what steps they are taking to ease the burden of Private Finance Initiative costs falling on healthcare trusts.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, a lot has been done. All PFI schemes are having their contracts reviewed for potential savings, following a Treasury-led pilot exercise last year. We are providing the seven trusts worst affected by PFI schemes access to a £1.5 billion support fund over a period of 25 years, which will be available from 2012-13 directly from the department. We have worked with another 16 to address their long-term sustainability.
Lord Harries of Pentregarth
I thank the Minister for his reply and I am glad to hear about the support fund. Is it not the case that the contracts at this time of national financial crisis need to be renegotiated in order to bring them more in line with the austerity being suffered by the rest of the nation? Not only are they being required to pay 14% or 15% interest, they are having to pay maintenance charges such as those quoted to me of £500 to put in a new lock and £80 to change a light bulb. As the Minister knows, there are now 20 healthcare trusts responsible for 60 hospitals in serious financial trouble.
Earl Howe
The noble and right reverend Lord is right. We believe that a number of the PFI schemes from the previous Administration were not soundly based in terms of their sustainability. As part of the work that we are doing on the Foundation Trust Pipeline, we have had to work on long-term sustainability solutions to help NHS trusts with PFI schemes, hence the direct financial support that I have referred to.
We have also organised PFI trust forums to disseminate the lessons learnt and to share experiences. We have earmarked resources to support the front line in ways to secure savings and we are currently in negotiation with people who have experience in the NHS and private sector to form a new team to support existing contract managers and, where necessary, to support negotiations with private sector PFI companies.
Baroness Wall of New Barnet
Will the noble Earl agree that in addition to the detriment suffered financially by PFI hospitals, as the noble and right reverend Lord Harries described, they suffer from a stranglehold as regards the movement of services, which means that they have to hold services back? Is not such power to stop the increased movement of services preventing trusts modernising and developing?
Earl Howe
The noble Baroness makes an important point and it is one that I was aware of some years ago when I visited a PFI-funded hospital. She is right; it does sometimes depend on the relationship established between the contractor and the hospital management but many of these contracts do result in exactly the kind of sclerosis that she has described. It is a lesson that we need to learn for future PFI schemes.
Baroness Wheatcroft
Will the Minister tell the House whether the Government have investigated the possibility of clawing back fees from those private sector advisers who helped the previous Administration construct those PFI contracts?
Earl Howe
My Lords, I am not aware that we are doing that particular thing, although I understand my noble friend’s concern. There are contracts in place which are legally binding. Nevertheless, within the framework of those contracts there is often scope for looking creatively and flexibly at their provisions. We are endeavouring to do this in order to help the trusts work their way through their problems.
Lord Warner
My Lords, what role is the Treasury playing in trying to mitigate the effects of some of those PFI contracts, given the part that it played in particular at its official level in agreeing and signing them off under the previous Administration? Indeed, many are still in place in the Treasury today.
Earl Howe
My Lords, the Treasury has been very helpful in advising my department on the kinds of flexibility that we may have in these difficult situations. It has also been helpful in refining the current PFI model so that, as and when we use PFI again, we have a tighter structure which strikes a better balance between risk and reward to the private sector.
Baroness Jolly
My Lords, many community health schemes were funded using the LIFT programme. What is the Government’s view of their affordability now?
Earl Howe
My Lords, LIFT is one tool that we have in financing capital schemes in the community, many of which have been successful. Such schemes promote integrated services, which I know my noble friend will welcome. All LIFT schemes have been and will be assessed for affordability and value for money. It is not a universal prescription by any means, but we look constructively at LIFT as one way of delivering capital schemes.
Lord Hunt of Kings Heath
My Lords, I refer noble Lords to my health interests in the register. Will the Minister confirm that, under PFI, more than 100 new hospitals were built by the previous Administration? Will he also confirm that the annual expenditure on those schemes is less than 1%? In fact, does he agree that the real financial problem of the NHS is the £20 billion that his Government are taking out of it in a four-year period?
Earl Howe
We are not taking £20 billion out of the NHS; we are redeploying an increasing budget so that we get better value for money for the taxpayer. I say in answer to the noble Lord’s first point, which I think was more serious than his second, that we have confirmed that we remain committed to public/private partnerships. We think that they can continue to play an important role in delivering the country’s future infrastructure. However, it must be on the right basis, with tighter conditions attached.