HOSPITAL chiefs hope to save more than £200million over the next 20 years by buying their way out of private-finance initiatives set to cost them quadruple the value of the original loans.
Northumberland County Council has paved the way for a potential buy-out by agreeing a £100million loan to health trust bosses.
The proposed 25-year loan to Northumbria Healthcare NHS Trust will help safeguard and improve health services by enabling the trust to terminate private-finance initiative (PFI) contracts set to cost it more than £300million.
The contracts, agreed in 2002, were negotiated to fund a second phase of building work at Ashington’s Wansbeck General Hospital and the rebuilding of Hexham General Hospital.
The loan will also help avert the need for cost-cutting and fund new developments in the pipeline.
The deals have a capital value of just short of £72million between them, but they are projected to cost the trust more than four times that figure – about £324million – by the time they expire in 2033.
That means a buy-out could save the trust more than £200million, although the actual saving made will depend on how much it is charged for terminating the contracts.
The loan agreed at last week’s full council meeting at County Hall in Morpeth to discuss next year’s budget will still have to go through further checks.
The authority’s Executive Member for Corporate Resources Andrew Tebbutt told the meeting: “The trust is locked into PFI contracts which are costing it a lot of money and one option is to borrow money from the council.
“It has obvious benefits for the people of Northumberland if we can help them fund their operations more cheaply. The council would earn interest on the loan, it improves healthcare opportunities for people in the county, and it means the trust doesn’t have to make cutbacks. We are not going into this without ensuring that the loan is perfectly legal and secure.”
Council Leader Jeff Reid added: “The primary reason for us doing this is to protect and improve healthcare services for our people.”
Trust Chief Executive Jim Mackey said afterwards: “At the time, PFI was the only option to complete Hexham and Wansbeck hospitals and without it we wouldn’t have had the new facilities which have served people in Northumberland so well over the last decade.
“We are committed to providing high-quality care to people in Northumberland and North Tyneside, whether that is in hospital, in the community or at home, and we have a duty to deliver the best value for money for taxpayers.”
“We have a reputation for being an innovative and forward-thinking organisation and this is further evidence of our track record of putting patients at the heart of everything we do. This agreement has been made possible by our strong partnership working relationship with Northumberland County Council.”