The Henley Standard recently reported that Townlands Hospital is not owned by the NHS. This should not be a surprise to anyone once you understand that none of the hospitals built over the last 25 years are owned by the NHS! Our local hospital is no exception. In fact, we are fortunate to have retained it – and that was only due to the hard work of local people led by the Townlands Steering Group.
Do you want to know more? Read on…
How are hospital buildings financed?
Nearly all hospitals that have been built in the UK over the last 25 years have been funded by a combination of the sale of assets (such as surplus land and buildings) and by borrowing on the financial markets.
The models used have included Private Finance Initiative (PFI), Public Private Partnership (PPP) and Local Improvement Finance Trust (LIFT). The principle of each of these models is that borrowing does not appear on the government’s books as debt, and their accounting rules are not broken. This started under John Major and was continued under Blair/Brown. Over the years these funding models have led to contracts which ranged from the adequate (such as Townlands under the Cameron government) to the financially disastrous.
How about Townlands?
Amber Solutions for Care, a developer, borrowed £7M from AVIVA to fund the hospital development of £8.7M. Under the contract the buildings were built, maintained and owned by Amber, and then leased back to the NHS. After 25 years, the NHS has the option of buying the buildings or of extending the lease.
This funding model for Townlands was made clear over the years leading up to the 2013 signing of the contract. This was discussed at TSG meetings; council meetings; and the details were reported in the Henley Standard. The principle of the contract was always transparent – although some of the actual sums involved, for example the cost of the 25 year lease to the NHS, were kept confidential.
Was the funding straightforward?
Difficulties over the £7M borrowed by Amber to fund the build was a key factor in a series of delays in 2012 and 2013 when Aviva were reluctant to lend the money under the originally proposed terms.
This was because under the terms of the 2012 Health and Social Care Act, NHS Property Services who as landowners were to sign the contract and act as guarantors of the loan, were no longer part of the NHS. (Yes – you read that right).
Under the 2012 Act all NHS property was transferred to NHS Property Services which is a private limited company with a single shareholder: the secretary of state for Health (then Jeremy Hunt, now Matt Hancock).
Was this kept quiet?
The Henley Standard covered the story in many reports in 2012 and 2013.
For example: see
A document describing the financial model for Townlands development regarding land; buildings; disposals; leases and contracts was distributed to the public at the time, and it is still available. It was always out in the open, and it was accepted as, because of government policy, it was the only way Townlands was going to be rebuilt.
What was the outcome?
Because the Townlands Steering Group and the community at large generally felt that the overriding objective was to secure the rebuild and local health facilities, we reluctantly accepted the financial model despite its imperfections. The recently asked question “Should taxpayers have paid for Townlands to be rebuilt” bogus. We are paying for the rebuild every day under the contract terms because the building is on lease.
The better question might be: “Should the NHS have used government borrowing to fund the rebuild, or borrowed from the banks at a higher rate of interest?” As it
Is, we have a wonderful new hospital delivering an increasing number of services for the long term. This is a great result.
Cllr Ian Reissmann
Chair of Townlands Steering Group