PFI

Mr. Hayes
To ask the Secretary of State for Health what the long-term liabilities of the private finance initiative (PFI) investment referred to on page 44 of her Department's annual report 2006 are; what the total buy-back option is; and what total annual expenditure on these areas was before the PFI contracts were signed.

Andy Burnham
The figures for private finance initiative (PFI) investment on page 44 of the Departmental Report 2006 show the Department's estimate for costs that are incurred by private sector contractors during the years in question in building hospital facilities that will be made available to the national health service under PFI contracts. The figures do not represent liabilities because the schemes are regarded under accounting standards as being ‘off balance sheet’.

Under a PFI contract, trusts may terminate the contract with notice at any time, without having to prove right and regardless of any prejudice to the private sector. Under these circumstances, compensation would be payable to the contractor on a trust default basis aiming to put the contractor in a position that is no better, no worse than it would have been had the contract run for its full length. A value-for- money case for exercising this option must be made.

In working up their preferred option in the business case process, which is developed into the eventual PFI solution, trusts re-assess fundamentally their service configuration and patient pathways, taking on board the provision of new IT, equipment, new construction methods and innovations. It is therefore not possible to directly compare like-for-like annual expenditure before and after a PFI contract is signed.

Mr. Hayes
To ask the Secretary of State for Health what the largest private finance initiative project to date has been; what the Department’s buy-back option on the project is; what the annual cost to the Department is; and what the total cost to the Department will be on reversion of the contract.

Andy Burnham
The biggest private finance initiative project (PFI) to date is at Barts and the London NHS Trust worth £1 billion.

Under a PFI contract, trusts may terminate the contract with notice at any time, without having to prove right and regardless of any prejudice to the private sector. Under these circumstances, compensation would be payable to the contractor on a trust default basis aiming to put the contractor in a position that is ‘no better, no worse’ than it would have been had the contract run for its full length. A value-for- money case for exercising this option must be made.

A unitary payment of £96.4 million per annum (at April 2005 prices) will be paid by Barts and the London NHS Trust to its private sector partner once the building work is completed. As with all PFI contracts, the unitary payment will increase in line with the retail price index (RPI) each year and is subject to satisfactory performance under the payment mechanism.

No compensation is paid to the contractor when the contract expires at the end of its full length (operational concession period is 32 years on this scheme) and the asset reverts back to the trust at no extra charge.