Comment / Harder tests set to follow PFI deal

THE GOVERNMENT WILL continue to act as guarantor for NHS private finance initiative schemes but, in an apparent quid pro quo with the Treasury, trusts face stricter assessments of their PFI schemes.

The move comes as the Commons treasury committee said high borrowing costs had made PFI an ‘extremely inefficient’ method of financing, while the NHS Confederation called on the government to ensure NHS organisations have better access to affordable capital.

The Department of Health said it would back deeds of safeguard for PFI deals that demonstrated value for money. The deeds provide assurance to the private sector that the Treasury will underwrite the contract even if the NHS organisation fails financially. But they will now be provided to schemes with capital values of more than £70m – previously the threshold was £10m.

In a letter to chief secretary to the Treasury Danny Alexander, health minister Simon Burns said the six priority health PFI schemes, including those at Royal Liverpool and Papworth, would not receive private funding if they were not underwritten.

In return, additional checks will be added to the process. Deeds of safeguard will only be issued following approval of outline and full business cases (even where a trust has foundation status).

The Commons treasury committee was unconvinced savings and efficiencies offset the higher cost of finance in PFI. It called on the National Audit Office to examine the value for money mechanism, which it believed favoured PFI over public funding.

Treasury committee chairman Andrew Tyrie added that as much risk as possible should be transferred to the private sector.