PFI in spotlight amid NHS Trust woes

The South London Healthcare NHS Trust has been put in the hands of an administrator after running up huge deficits. Part of the blame has been apportioned to PFI contracts at hospitals run by the trust.

The UK’s South London Healthcare NHS Trust has become the first such trust to be placed under the control of a special administrator after accumulating a deficit of more than £150 million (€190 million; $233 million) over three years, with further annual deficits of between £30 million and £75 million predicted over the next five years. 

The trust, which runs three hospitals in South London and Kent, has been put in a so-called “unsustainable providers” regime by the UK government’s Department of Health. A special administrator will take over the trust’s board and recommend measures to the health secretary to put the trust’s finances on a sustainable footing. 

It is reported that sources in the Conservative/Liberal Democrat coalition government attribute some of the blame to the prior Labour government’s decision to merge three smaller trusts in April 2009. However, two Private Finance Initiative (PFI) contracts that the trust signed up to have also attracted criticism, given that they are reportedly costing some £61 million a year in interest payments – reportedly accounting for around 14 percent of the trust’s income. 

Defenders of the PFI scheme say the NHS trusts are suffering from wider financial pressures on the NHS and that PFI has delivered many good schemes including hospitals that would not otherwise have been built. 

James Larmour, Of Counsel in law firm Hogan Lovells’ infrastructure and project finance practice, said that “investors in the trust’s PFI schemes should not be spooked by administration as statutory protections should safeguard their interests”. 

However, he added that “the cost of PFI schemes is high on the media agenda and the industry as a whole can expect some flak as a result”.