The sale of up to 6.5bn of primary care trust property will help the Department of Health out of the looming 16bn hole in its capital spending limit.
The limit imposed on the DH and NHS by the Treasury will be jeopardised next April when new accountancy rules mean private finance initiative debts cannot be hidden from NHS balance sheets.
The DH estimates the change will take up to£4bn out of its capital budget immediately, with£12bn more removed as construction on private finance hospitals is completed.
But the DH has been advised that local improvement finance trusts (LIFTs) - public-private investment vehicles used to finance new PCT facilities - will not be captured by the rules, as the assets go to the private sector at the end of the deals.
Last month’s pre-Budget report indicated the DH is now planning to transfer entire PCT estates over to these schemes. The total value of PCT estates in England is£6.5bn.
Calls for transparency
The DH and Treasury claim the move will lead to better estate management, but DH director general of NHS finance, performance and operations David Flory admitted that removing£6.5bn from the NHS balance sheet would “give us some more flexibility” on DH capital spending limits.
Commons public accounts committee member Richard Bacon MP (Con) told HSJ: “If this is about hiding liabilities, then forget it. What we need is transparency. Accounting fiddles don’t cut it for me.”
The Treasury had been expected to help the DH cope with the private finance balance sheet change by extending its capital allocation. But the reference to extending LIFT schemes in the pre-Budget report has fuelled concerns that the Treasury will ask the DH to offset the extra cost by the sale of PCT estates.
A Confederation of British Industry spokesperson said the recession had enhanced private sector interest in secure investments in public services. But PCT sources told HSJthis was a poor time to sell estates as the opportunity to make a profit by parcelling off bits of land for house building, for example, was limited.
Even if the Treasury extended the DH’s capital allocation to compensate for the finance rule change, the department could still struggle to fund the renovation of primary care facilities for the desired shift of hospital care into the community. DH figures show a£4bn backlog in NHS building maintenance -£331m relating to PCT facilities.