English NHS Trust put into administration as Labour’s PFI legacy takes its toll

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By Bob Duncan
 
A London NHS hospital trust that is losing £1m a week has been put into administration in a last ditch attempt to try and stop it from collapsing, the Department of Health said today.
 
Health Secretary Andrew Lansley has appointed a trust special administrator to try and turn around the struggling South London Healthcare NHS Trust which runs Queen Mary’s in Sidcup, the Queen Elizabeth in Woolwich and the Princess Royal University Hospital in Bromley.

Sources close to Health Secretary Andrew 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 £61 million 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.

The chairs and directors have been informed that they have been suspended from board duties.  The chief executive was informed that the trust is being put into the “unsustainable providers regime”, which was introduced by the last Labour government but never before used. 

It is the first time in NHS history that a trust has been forced to hand over its administration powers to the Department of Health after failing to meet prescribed standards.  Matthew Kershaw is the special administrator tasked with sorting out the mess.

The Trust was only created in 2009 after the merger of the three hospitals, yet it has gone £150million in the red over the past three years largely because of two crippling Private Finance Initiative deals agreed by the last Labour government. The PFI deals are now costing £61million a year in interest.

The Health Secretary stepped in after draft financial plans showed the trust would have a deficit of  £1 million a week for the next five years, despite previous efforts to tackle the situation.

Speaking on Friday, he said: “Past efforts have not succeeded in putting the South London Healthcare Trust on a sustainable path. This will be a big challenge and my key objective for all NHS Trusts is to ensure they deliver high-quality services to patients that are clinically and financially sustainable for the long term.

“The purpose of the trust special administrator is to ensure that services are high quality and to ensure a lasting clinical and financial solution.”

Lansley said the ground-breaking decision was in the interest of patients.

“Although there have been some improvements in mortality rates, maternity services and infection control, and some early signs of improvements in waiting times, they do not go far enough. It will be impossible for South London to build on these improvements while tackling such a large deficit.

“Matthew, working with clinicians, all other staff, commissioners, patients, the public and other stakeholders, must now drive the changes and shape a sustainable solution for South London Healthcare NHS Trust and the local health economy.

“I am confident that with the regime I am enacting today in place, and working extensively with clinicians, health service leaders, patients and local people, Matthew will have the tools and framework in place to find a long-term satisfactory solution for the people of south east London.”

Mr Kershaw will first publish a report on October 29 after examining the Trust’s long-standing difficulties.  He will then launch a 30-day consultation with staff, patients and public on a draft report.  A final report will be sent to Mr Lansley on January 8, 2013.

Kershaw said: “My priority is to work with staff, patients, the public and all those involved in healthcare services in the south east London area to maintain high quality, effective services during the running of the Unsustainable Provider Regime.

“This means developing recommendations that ensure that people in south east London can access high quality, safe, and financially sustainable NHS services for the long-term. Together we will need to think differently, be bold and accept that change needs to happen. The status quo is not sustainable.”

A spokesman for the Royal College of Nursing, said: “This announcement is an unprecedented step by the Secretary of State and moves the NHS into unchartered waters.  It presents a worrying state of affairs for both patients and staff at the Trust, who will be undoubtedly concerned by today’s decision. We know that the Trust has been in financial difficulties for some time.”

Rob Macey, GMB union senior organiser, said: “The NHS special measures regime states that the interests of patients must come first.  Proposals to close or privatise services would mean dramatic cuts to the availability and quality of services available to patients.
 
“We are calling on the Government and the administrator to listen to the thousands of staff who have signed GMB’s petition for a bailout to be provided to the Trust.  It cannot be right that we are prepared to bail out the banks but not our NHS.”

Foundation Trust Network (FTN) chief executive Sue Slipman said: “This is the first time a failure regime is being used on an NHS trust and the FTN sees it as a crucial test of how a key part of the new system will work.  All eyes will be on the process which, if it works as intended, will resolve the situation swiftly and ensure there is minimum disruption to patient care while allowing services to be delivered more efficiently.
 
“In the future, bold decisions might need to be made which allow NHS trusts to reorganise their services before they get to the point of being forced into failure.  The health service is under huge financial pressure and there is no doubt that there will have to be many more changes to make the savings needed to invest in new patterns of healthcare.

“Ultimately, the way forward has to be to allow NHS trusts to be in a position to respond quickly and flexibly to changes in local healthcare needs without needing to call in the failure regime.”

Now it has emerged that up to 22 English NHS trusts are facing serious financial difficulties because of expensive PFI schemes, with six thought to have taken on projects viewed by ministers as “unsustainable”.  The schemes saw private firms building hospitals, leaving the NHS with an annual fee to pay over around 30 years. Those six NHS trusts face joining South London Healthcare into “administration”.

Professor Chris Ham, chief executive of the leading health think-tank the Kings Fund said the situation was a sign of things to come.  He said a special administrator would look at a wider range of options, including splitting up the trust’s services and “disposing of them to other providers.

“The first priority must be to ensure continuity of patient care for the services that must remain at these hospitals. For other services more radical options need to be looked at, including transferring services to other hospitals, or stopping that care altogether.”

The total value of the NHS buildings built by Labour under the scheme is £11.4bn.  But the bill, which will also include fees for maintenance, cleaning and portering, will come to more than £70bn on current projections and will not be paid off until 2049.  Some trusts are spending up to a fifth of their budget servicing the mortgages.

Across the public sector, taxpayers are committed to paying £229bn for hospitals, schools, roads and other projects with a capital value of £56bn as a result of Labour’s PFI legacy.

But last week former Labour Prime Minister Tony Blair said the contribution PFI had made to rebuilding the country’s infrastructure was “immense”. 

“PFI has been copied around the world,” he said. “I am sure, as with any system, you will get a situation when sometimes it doesn’t work or people will get into difficulty as they do in the non PFI situations, but if you look at PFI overall and what it delivered in terms of hospitals, schools and renovations to the infrastructure of the country it has been immense.”
 
The Tories called on Labour to “apologise for leaving hospitals in a debt crisis”.  A source close to Mr Lansley said Labour had brought the south London trust to “the brink of bankruptcy”.
 
“Labour turned a blind eye to these problems for years.  They burdened it with two unaffordable PFIs worth £61 million a year and they crippled the organisation with debt from the beginning,” the source said.

Labour, however, accused the Government of “losing its grip” on NHS finances and claimed PFI had in fact benefitted patients.

“After many years of neglect by the Tories, Labour used PFI to deliver the biggest hospital-building programme in the history of the NHS, benefiting millions of patients,” a spokesman said. “In contrast, this government has lost its grip on [English] NHS finances and is wasting billions of pounds on a NHS reorganisation which is opposed by patients and health professionals.”
 
The state of the English NHS contrasts sharply with Scotland where PFI contracts were ruled out by the fledgling SNP administration in 2007.  Only yesterday the Scottish Futures Trust, a body set up by the SNP to look at alternatives to PFI, announced that it had made savings of over £131 million last year.

The trust, which was set up by the SNP government to find ways to avoid the excess profits made from Private Financing Initiative (PFI) model for public sector projects, believes its efficiency drive has cut costs on the school building budget so much that it can afford to construct another 12 schools.
 
According to the trust, it does this through what it calls the non-profit distributing model (NPD) – set up as a way of using private financing to fund large infrastructure projects at a lower cost than the widely discredited PFI model brought in by the last Labour Government.

Scotland has its own history of PFI under the previous Labour/Lib-Dem administration, Bob Doris MSP, Deputy Convener of the Health and Sport Committee, said: “This is a nightmare situation for the staff, patients and the one million people who rely on the services of the South London Healthcare Trust area.  The SNP has consistently criticised the sustainability of PFI projects, warning of the dangers of situations like the one currently unfolding.

“Health is a classic example how decisions for Scotland are best made by those elected by the people of Scotland, rather than leaving matters in the hands of Westminster politicians.  Thank goodness the NHS in Scotland is in safe hands, protected from privatisation.

“Scotland’s NHS is already completely independent and remains true to its founding principles.  The kind of terrible situation we are currently seeing south of the border could never be allowed to happen in Scotland.”

Mr Doris, Deputy Convener of the Health Committee, added that it is the independence of NHS Scotland that offers it protection from what is happening south of the border and that independence is needed to protect other services in Scotland from Tory privatisation.

He added: “There could scarcely be a greater contrast to the approach south of the border than the New Southern General Hospital in Glasgow, being delivered by the SNP Government entirely from public funds.”