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Sir Robert Naylor:
‘We will have to change borrowing rules’ |
Hospital ‘vulnerable’ over the ability to borrow new money
UCLH chief admits changes in methods of accounting could hit trust
NEW accountancy rules coming into effect next April could jeopardise a series of planned multi-million pound developments at University College London Hospital.
Hospital chief executive Sir Robert Naylor said his team of financial experts had spent “a lot of time” monitoring the changes, which will affect all hospitals built under Private Finance Initiative, and admits the trust is in “a position of vulnerability”.
Under the PFI scheme, a partnership between the private and public sectors, a consortium of building companies called Health Management UCLH (HMU) was contracted to build the £422 million public hospital in Euston Road.
The deal, fixed in 2000, means the trust must repay £64 million each year to HMU for 40 years.
The appeal of PFI for UCLH bosses is that the massive debt can be kept off the trust’s “balance sheet”, allowing for increased borrowing.
But following international condemnation of this system – which can exaggerate an institution’s financial clout – the government has been forced to adopt new accounting standards forcing all PFI debts to be declared “on balance” from April.
Sir Robert said: “Because ours is the biggest completed PFI in the history of the health service obviously we are in a position of vulnerability in this whole discussion.
“We have gone into this in quite some detail. What will happen is that the amount we can borrow is related
to our financial strength and therefore it will have an impact on our ability to borrow.
“We will have to change our borrowing rules, as in to what extent we can go out in-to the market place.”
He added: “At the moment we could borrow in excess of around £100 million. That £100 million is based on today’s figures. If we can still do that [after April] is anyone’s guess.”
UCLH has a series of high-profile developments in the pipeline that are expected to be finished within 10 years, including a £110 million cancer centre, the country’s leading medical research centre, a new heart hospital and a replacement for the Eastman Dental Hospital.
He said: “What we are trying to do is gradually to acquire as many buildings in our area… Our plan is to knock them all down and build all the next developments.”
The cancer centre would not be affected by the changes in the accounting rules, Sir Robert said, but the future was not so certain.
He said: “We have a lot of cash, around £140 million invested – and none of it is in Iceland. The reason we have done so well is we sold the Middlesex Hospital for £175 million. If we sold today, I have been told by leading property developers, we wouldn’t get £75 million. The reality is we made £100 million out of the private sector. We can pay for our new cancer centre out of our own money because we don’t have to borrow. We will not need to borrow for around four to five years. Only then we will need to because of our long-term developments. What will happen then is anyone’s guess.”
''Anyone’s guess what will happen’
UCLH chief executive Sir Robert Naylor dismissed speculation in the Health Service Journal that hospital bosses were considering legal loopholes to get out of declaring their debt.
It was reported that the trust’s PFI debt could be hidden by handing over the ownership of the new building to a charity.
The government has always tried to damp down opposition to PFI by stressing that, at the end of the 40 or so years, the asset would revert to the NHS. Charitable status would mean this is no longer true. It raises the spectre of billions of pounds of public funds having been spent building hospitals which are not legally part of the state.
Former UCL Professor Allyson Pollock, a leading commentator on PFI over the last 10 years, said: “There are grave implications for public and parliamentary accountability of public funds and provision of services. There is no evidence to support a shift away from public ownership.”
Sir Robert said there were no current plans to follow this route, but that more would be known after April. |
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