A HEALTH trust is set to be given a £100m loan by a council to enable it to get out of costly private finance contracts for hospital building projects.
The proposed 25-year loan to the Northumbria Healthcare NHS Foundation Trust will be made by Northumberland County Council to help protect and enhance health services in the county.
The loan would allow the trust to buy itself out of the remainder of expensive private finance initiative (PFI) contracts for work on Hexham Hospital and the second phase of Ashington’s Wansbeck General.
They have a total capital value of almost £72m, but the trust’s projected payments on the PFI schemes total £324m between 2002 and 2033.
The loan would allow the trust to save money by terminating the PFI contracts, and help prevent potential cost-cutting reductions in hospital and community services across Northumberland.
It would also help fund its 10-year strategy for revenue and capital developments.
The idea of a loan is one of several, potentially cheaper alternatives to PFI being pursued by NHS hospitals nationally. Other options include securing funding from private equity, pension funds and the bond markets.
Councils can access funding through their powers to borrow large sums from the Public Works Loan Board. Northumberland County Council’s loan would be provided through the use of its “wellbeing powers” to help protect local services and the economy.
The council has approved the £100m loan in principle, but it is still subject to further due diligence and external audit checks.
Executive member for corporate resources, Andrew Tebbutt, described the deal as a “win, win, win situation”, arguing: “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 means the trust doesn’t have to make cutbacks.”
Mr Tebbutt added: “We are not going into this without ensuring that the loan is perfectly legal and secure.”
Council leader Jeff Reid said the loan would allow the trust to borrow money more cheaply than it could elsewhere.
“The primary reason for us doing this, however, is to protect and improve healthcare services for our people,” he said.
The council’s finance director, Steven Mason, said the deal would have to involve clear commitments from the trust to use the loan to protect existing services and invest in new ones.
“If we can facilitate the trust securing savings then that protects healthcare within Northumberland,” he said..
“We are doing this so healthcare services are protected for Northumberland residents by the trust getting access to cheaper finance. We have taken legal advice to say that we can do this.”
Trust chief executive Jim Mackey is leading a Foundation Trust Network drive to find alternative sources of funding to PFI.
He said: “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.”
Mr Mackey insisted the trust was committed to providing high quality care to people and told of its “duty to deliver the best value for money for taxpayers”.
Referring to what he called the trust’s reputation for innovation and forward-thinking, he said it puts patients at the heart of everything it does.
Mr Mackey said the agreement was made possible by the trust’s strong working relationship with the council.