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Health trusts pay price of PFI deals; Huge losses force special measures.

Byline: Ella Pickover

ANOTHER 20 NHS trusts could also find themselves in special measures, it emerged yesterday, as Health Secretary Andrew Lansley seeks to turn around one trust losing pounds 1m a week.

South London Healthcare NHS Trust will be the first in the country to be put under the control of a special administrator tasked with putting it on a viable footing.

Sources said six trusts, including South London, require bailouts from the Government because their PFI deals are unsustainable.

And a further 15 trusts are facing serious financial difficulties which could ultimately see them in the same situation, it has emerged.

South London Healthcare NHS Trust, which runs three hospitals, has been criticised over standards of care and has run up deficits of more than pounds 150m over the past three years.

Despite efforts to improve its financial performance, it is thought to be on track to lose between pounds 30m and pounds 75m a year for the next five years. Its chief executive was informed this week that the trust is likely to be put into the "unsustainable providers regime" which was introduced by the last Labour government but never before used.

Mr Lansley sent a letter as the first step in the legal process towards installing a special administrator using the powers.

The administrator will take over the board and recommend measures to the Health Secretary to put the trust's finances on a sustainable basis. The trust runs Queen Mary's in Sidcup, the Queen Elizabeth in Woolwich and the Princess Royal University Hospital in Bromley. It has released a statement reassuring patients that services would continue as normal. Sources close to Mr Lansley said long-standing difficulties had been made worse by Labour's merger of the three hospitals' smaller trusts in April 2009 and by two PFI deals that are now costing pounds 61m a year in interest.

They said the hospital's deficit last year - covered by money from elsewhere in the NHS budget - was equivalent to the salaries of 1,200 nurses or 200 hip replacements a week. A further 20 other NHS Trusts are also facing serious financial difficulties, some because of taking on expensive PFI schemes and others because of different issues.

They have been set goals by the Department of Health, but if they do not achieve the results, they could also face being put in special measures.

British Medical Association chairman Dr Hamish Meldrum said PFI contracts were a short term and "expensive way of bringing capital into the NHS" and added that there was no "coherent failure system".

PRIVATE FINANCE INITIATIVES - THE BACKGROUND ? What is PFI? PRIVATE Finance Initiatives were introduced under John Major's administration in 1992 and was expanded dramatically by New Labour between 1997 and 2010 as a means of enabling private investors to take on the financing, construction and operation of public sector infrastructure projects. The projects are put out to tender and firms put in the initial investment and then lease the finished project back to the Government, often on long-term leases. Private firms often manage public sector facilities under the scheme.

Why did it become more popular under New Labour? The initiative was designed to speed up the renewal of public service infrastructure. Former Prime Minister Gordon Brown's boasts that New Labour had built over 100 new hospitals would not have been possible without PFI. Some 700 projects have been delivered under PFI since its introduction 20 years ago, and the taxpayer is committed to spending of around pounds 200bn in contracts covering as much as 30 years.

What next for PFI? In November, Chancellor George Osborne announced a "fundamental reassessment" of the scheme with the aim of cutting costs and improving transparency. The review will aim to create a new model for using private-sector expertise to deliver public assets and services at a lower cost to the taxpayer, said the Treasury. The coalition continues to use PFIs such as the one that will provide 300 new schools at a cost of around pounds 2bn.
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Publication:The Journal (Newcastle, England)
Date:Jun 27, 2012
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