Download The return of PFI – will the NHS pay a higher price for new hospitals?

The return of PFI –
will the NHS pay a higher
price for new hospitals?
November 2014
The Centre for Health and the Public Interest
to health and social care policies based on
accountability and the public interest.
The Centre seeks to frame the policy debate in a way that is evidence-based and open and
The author
Dr Mark Hellowell
Dr Mark Hellowell is a Lecturer in Global Health Policy at the University of Edinburgh. His research
Published by CHPI
Email: [email protected]
www.chpi.org.uk
The return of PFI – will the NHS pay a higher price for new hospitals?
Contents
NHS Trusts and their ability to deliver sustainable healthcare services
Why would an NHS Trust agree to a PFI deal if the charges are
References
18
3
The return of PFI – will the NHS pay a higher price for new hospitals?
factor.
4
The return of PFI – will the NHS pay a higher price for new hospitals?
they have signed up to the contracts because there is no other way of
meant that PFI investments are not counted as part of public spending or
health economies and their ability to address health need.
The return of PFI – will the NHS pay a higher price for new hospitals?
1.
1
The
emergency unit and maternity services at neighbouring University Hospital
2.
*
2
successor PF2:
The return of PFI – will the NHS pay a higher price for new hospitals?
How do large PFI hospital schemes impact on
deliver sustainable healthcare services to local
hospitals and schools and receives in return a revenue stream from the
6
6.
last decade
most respects analogous to a sovereign debt commitment: the state commits
8
8.
billion in today’s money.9
responsibility for making the annual PFI payments rests with individual NHS
The return of PFI – will the NHS pay a higher price for new hospitals?
9.
regime used by NHS England to fund NHS hospitals does not provide any
to what would be possible in the absence of these charges.
10.
types of investments that carry a similar level of risk.
11.
Empirical research has shown that the rate of return on PFI deals typically
the minimum acceptable return on their investments.10
12.
11
11
Returns
selling their assets.12 These returns show that contract prices have been set
high annual PFI payments.
8
The return of PFI – will the NHS pay a higher price for new hospitals?
Why would an NHS Trust agree to a PFI deal
if the charges are so high and are likely to be
fallacy’.
16.
*
the wider healthcare system or social welfare more generally.
In this
The return of PFI – will the NHS pay a higher price for new hospitals?
12
18.
19.
scheme.12
20.
address these issues.
10
The return of PFI – will the NHS pay a higher price for new hospitals?
21.
22.
and that assets are maintained to a high standard throughout their lives’. To
To achieve this the government changed the types of investors who would
the debt capital.16
is reduced to simply maintaining the facility at the standard contractually agreed.
11
The return of PFI – will the NHS pay a higher price for new hospitals?
26.
annual PFI payments.
28.
*
the intended change in
original PFI deals.
PFI
PF2
Cost
Weighted
Cost
Equity
Debt
Pre-tax Weighted Average Cost of Capital
Cost
Weighted
Cost
Equity
Debt
Pre-tax Weighted Average Cost of Capital
29.
to generate a lower overall cost of capital than would be the case under an
12
The return of PFI – will the NHS pay a higher price for new hospitals?
that not all of the funds to build and run the hospital will come from the private
Cost
Weighted Cost
Private equity
Debt
13
The return of PFI – will the NHS pay a higher price for new hospitals?
a lower probability of default. This may mean they are able to charge a lower
the cost of private sector capital to be paid by the public sector over the period
therefore apparent that the move to PF2 will not address – indeed is likely to
14
The return of PFI – will the NHS pay a higher price for new hospitals?
whether the schools and hospitals built under PFI appear in the main measures
*
any capital investment which is secured under PF2 will not be counted as
increased by it.
The return of PFI – will the NHS pay a higher price for new hospitals?
investments to be agreed in each year.
for budgetary reasons at central government level – i.e. there will be a limit to
framework.
The return of PFI – will the NHS pay a higher price for new hospitals?
Conclusion
increase
the capital budgets available to government departments and individual public
health economies and their ability to address health need.
The return of PFI – will the NHS pay a higher price for new hospitals?
References
1
9
Securing
sustainable NHS services: the Trust Special Administrator’s
report on South London Healthcare NHS Trust and the NHS
in south east London
Health Policy
10
Health
Policy
2
BMJ
11
and Norwich PFI hospital: how the deal can be viewed in the
PFI projects data: March 2013
12
Peterborough and Stamford
A new approach to public private
partnerships
Econometrica
DH approval of Outline Business
Case
6
Review of the
European PPP Market: 2012
A new approach to public private
partnerships
16
A new approach to public private
partnerships
8
.
18
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