“Soft facilities management” services like cleaning and catering will be excluded from future NHS private finance projects, new government guidance reveals.
Chancellor George Osborne’s plans for revamped private finance arrangements, named PF2, were unveiled this afternoon as part of his autumn statement.
The plans will also see the government “look to act as a minority public equity co-investor in projects”, which it hopes will lead to greater transparency and better value.
The PFI review said the government would also introduce funding competitions for some of the funding and attempt to attract institutional investors like pension funds.
In August HSJ reported North Tees and Hartlepool Hospitals Foundation Trust was progressing deals with two pension funds for its £298m PFI deal.
The PF2 announcement also pledged an 18-month time limit for agreeing deals and a “standardised and efficient approach to procurement”, while at the same time strengthening scrutiny.
There has been widespread condemnation of the way some PFI deals have been signed off, with the National Audit Office last week criticising the process that saw Peterborough and Stamford Hospitals Foundation Trust left with an unaffordable PFI.
The Department of Health has agreed £1.5bn of funding to be used to help six trusts cover the costs of PFI repayments where they form a significant proportion of a trust’s income.
The DH rule of thumb is that a repayment amounting to 12.5 per cent or more of a trust’s turnover qualifies it for national support.
One source close to the world of NHS PFI was sceptical about whether the hospital sector would see significant investment.
The source told HSJ: “Given the many hundreds of meetings Treasury hosted as part of the PFI review with contractors, health professionals and funders as well as the many written submissions in the ‘call for evidence’ what PF2 is in reality is the model used for LIFT [local improvement finance trust] schemes in primary care.
“It feels a fudge, a long and protracted exercise which in reality stalled PFIs. I doubt there is any real commitment in Treasury for significant investment in hospitals going forward. Little of the detail relating to infrastructure investment mentions hospital developments. I suspect roads, schools and other sectors will benefit from infrastructure investment.”
LIFT schemes see a private partner provide 60 per cent of the funding, with the remaining 40 per cent coming from the primary care trust and Department of Health-owned firms known as community health partnerships.
The DH said it would talk to the Treasury about whether it would establish a central procurement unit for new PFIs, as the Treasury review suggested.
A senior source in NHS finance told HSJ: “Putting in public sector equity might help with control. But the [PFI deals] that have gone wrong have usually been bad deals rather than structural faults in my view, with overgenerous affordability assumptions or the wrong idea about what was needed.”
The government confirmed the first NHS trust it would be considering for a PF2 deal was Sandwell and West Birmingham Hospitals, which is seeking a redevelopment deal worth £370m after VAT.
In a statement the trust said: “We anticipate that it will take six months to refresh our plans in the light of the latest developments. Following approval procedures, the procurement, building and commissioning phases of the scheme will then take up to five years to complete.”
The Treasury document confirmed the government’s intention to use private capital funding but said: “While the government remains committed to private sector involvement in delivering infrastructure, it recognises the concerns with PFI and the need for reform.
“There has been a lack of transparency of the financial performance of projects and the returns made by investors and insufficient transparency of the future liabilities to the taxpayer created by PFI projects. This has led to an increasing tension in the relationship between PFI providers, the public sector and the wider public.”