First PFI hospital makes pounds 37m for investors

Click to follow
The Independent Online
THE FIRST NHS hospital to be built under the Government's private finance initiative (PFI) has earned a return of up to 50 per cent a year for its investors, a report says today.

An investigation by the National Audit Office into the Darent Valley Hospital, a 400-bed institution in Dartford, Kent, completed in 2000, has revealed the spectacular gains to be made under the controversial PFI scheme.

The disclosure comes as a snapshot survey by The Independent shows some of the largest NHS trusts in the country are heading for a deficit by the end of the financial year because of exceptional pressures.

Four companies which invested pounds 13m in the Darent Valley Hospital in 1997 were able to realise pounds 37m in 2003 under a refinancing deal, an annual rate of return of 25 per cent. One company, Carillion, which invested pounds 4.1m in the hospital in 1997, sold its share in 2003 for pounds 16m, an annual rate of return of 50 per cent.

Edward Leigh, the chairman of the Commons Public Accounts Committee, said yesterday: "This has been a reasonable deal for the public sector but a fantastic deal for the private companies. The private sector is justified in being rewarded for having taken a risk by entering what was the first PFI hospital contract. But when so much of the profits are realised early on in the project, there is a concern that the private sector will not be so committed to the rest of the work. I am worried by evidence that the trust has so far been too lenient on lapses in service."

Sir John Bourn, the head of the NAO, said the shareholders in the Darent Valley scheme would now earn returns 60 per cent higher than they anticipated when bidding for the contract. But he criticised the trust for failing to impose greater deductions where there were lapses in service.

He said: "Although refinancing may offer attractive benefits to the public sector it may also present risks which authorities need to fully assess before agreeing to the refinancing."

The PFI scheme is being used to finance the biggest rebuilding programme in the history of the NHS. But it has been widely criticised for mortgaging the health service's future.

Borrowing funds from the private sector is more expensive than borrowing them from the Government and hospitals built under the PFI scheme will be paying off their loans for decades to come, adding to the running cost of the NHS.

But ministers argue that limits on government borrowing imposed by the Treasury mean that the hospital building programme would have to be slowed, unacceptably impeding the recovery of the NHS.

John Reid, the Health Secretary, allocated pounds 135m yesterday to England's 303 Primary Care Trusts over the next two years, with the greatest sums going to disadvantaged areas.

The Healthcare Commission criticised the Government last year for failing to ensure that the neediest areas shared in the record growth in the NHS budget. Mr Reid said 88 PCTs had been allocated extra money to tackle "appalling inequalities" in life expectancy and higher rates of disease. No PCT would receive less than 8.1 per cent over the two years 2006-07 and 2007-08, he said.

The survey of hospital trusts by The Independent shows that despite record investment many are heading for a deficit by the year's end next month.

Southampton General Hospital Trust is predicting a pounds 14m overspend by April, while Derriford Hospital Trust in Plymouth is predicting a deficit of pounds 9m to pounds 13m.

Leeds NHS Trust, Manchester Royal Infirmary NHS Trust and the Royal Free Hospital Trust in London are forecasting deficits of pounds 7m.

The NHS Confederation, which represents managers, said: "There are new cost pressures this year with the consultant contract, GPs contract and working time directive for junior doctors. It is true there is more money than ever before but there is a very big increase in demands on the service."

A spokesperson for the Department of Health said: "Darent Valley Hospital is a successful PFI project - and the trust has shared in the gains. The annual cost of the hospital is now pounds 2m lower in real terms and the overall cost is pounds 12m less in present value terms."

A total of 132 PFI and public capital new hospital schemes worth pounds 17.2bn are going ahead.



The 400-bed Darent Valley Hospital opened in July 2000, replacing old facilities which had been on three sites. As Britain's first PFI hospital, it was criticised for having too few beds and an inadequate A&E department.

GPs initially boycotted the hospital and it was awarded zero stars in 2001. New management was brought in under a franchising arrangement and local support has grown. In 2003 and 2004 the hospital was awarded three stars.

Under the PFI refinancing deal with private investors the trust will benefit by pounds 11m.


The Central Manchester University Hospitals NHS Trust is predicting a pounds 7m deficit in April. The main causes are pressure to treat more patients from the waiting lists to hit waiting time targets. Extra theatre sessions have been laid on to meet the demand and these have added to costs.

The trust only received 80 per cent of the funding it requested to support its PFI scheme, which is creating an "unavoidable pressure".

No ward closures are planned but the trust is looking for savings such as reducing agency nurses.