Is the NHS wise to rack up debt?

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By Nick Triggle Health reporter, BBC News The new St Helens Hospital opened this weekThe first patients to be admitted to the new St Helens Hospital this week would no doubt have been impressed.

From its state-of-the-art operating theatres to the curved skirting boards and walls to stop bugs taking hold, the Merseyside hospital is very much the face of the modern health service.

Indeed, hospital chief executive Ann Marr went as far to say that it was one of "the best in the world".

But the opening of what was the 100th hospital under the government's 10-year building programme comes as questions are being asked about the approach taken to upgrading the NHS's estate.

To fund the largest renovation project in the history of the health service, ministers invited in the private sector.

The schemes have been largely funded through what is known as the private finance initiative.

Interest

Under the agreements, the private sector designs, builds and finances the projects, leaving the NHS to repay the cost plus interest over the following decades.

In effect, the NHS is saddled with a mortgage much like any home-owner is.

Figures obtained by the Tories have suggested that the NHS could end up paying back more than £50bn over the next 30 years for hospitals worth a fifth of that amount.

But at a time when debt has become an unfashionable word in the wider economy many are unconvinced whether the government is right to celebrate such a milestone.

HOSPITAL BUILDING: FACTS AND FIGURES St Helens was the 100th new hospital to open under the government's building programmeAnother 31 are in the process of being constructed, bringing total spending to £12bnMost of this - 101 schemes to be precise - is being funded through PFIBy 2010, just a fifth of the NHS stock of hospitals will pre-date the 1948 birth of the health service. Prior to the building programme it stood at 50% Jonathan Fielden, chairman of the British Medical Association's consultants committee, says he is concerned about the health service's ability to repay the debts.

"Funding streams are unpredictable in the NHS. We have seen hospitals get into difficulty already and this could get worse."

Already this week, reports emerged of local health bosses offering financial incentives to encourage doctors not to refer patients to hospital in a bid to save money.

The NHS may also find itself hit next time the government comes to deciding on its budget in two years time following its massive injection of public funds into banks.

Professor Chris Ham, a Birmingham University health policy expert and former government adviser, believes the financial climate may also impact on future rebuilding schemes.

Another host of PFI hospital builds have already been signed off with many more in the pipeline.

Professor Ham says: "I think we are going to enter a period where it will be very difficult to secure funding for future PFIs in the NHS. The era has come to an end."

But while he acknowledges money is going to become even tighter in the public sector, Professor Ham says the NHS will have no other option but to keep up with its repayments.

"I am very sceptical about PFI. It seems a very expensive way of paying for these hospitals.

"However, the NHS has to keep paying. It will not be allowed to default and that could mean money being taken away from services."

In fact, there were already signs of this the last time money got really tight in the health service.

Three years ago, health bosses were under pressure to balance the books amid mounting end-of-year deficits.

During that period London's Queen Elizabeth Hospital blamed its PFI repayments for its money worries.

Ageing

However, not everyone is as critical of the government's approach.

Professor John Appleby, chief economist at the King's Fund health think-tank, says it is hard to see how else the government could have afforded to do the much needed building work.

"These were ageing buildings. Some of them were old Victorian workhouses and needed to be replaced."

But he still adds: "My concern is that at a time when the government is talking about moving care out of hospitals is it right that we have so many being opened?"

Nonetheless, the government remains convinced of its approach.

Health minister Ben Bradshaw points out that before the building programme started half of the NHS estate pre-dated the 1948 birth of the NHS. By 2010, that figure will be down to just 20%.

And he adds: "As a result of successive generous spending settlements and the excellent financial management across the NHS that has been achieved over the last few years, it is on a firm financial footing for the years ahead."