The Naylor Report 2017

The Government will work with private firms to sell off NHS land and property.

“Six regional public/private partnerships will be created to dispose of assets that are no longer required or not fit for purpose.

“The plan is named Project Phoenix. Under the PPP deals it is likely the profit from sales would be shared between the NHS and the private partners – though how the cash would be split has yet to be revealed.

“One source with knowledge of the project said the arrangements could involve using private funding to achieve the best market price for the sales.

“This would maximise the price for the sale without needing upfront public investment.”

• Health Service Journal, 13 June 2017

The Naylor Report estimates that £2.7 billion could be raised through releasing land from the NHS estate.

Sir Naylor also recommends establishing a “powerful new NHS Property Board”; Dr Sarah Gangoli, member of the campaign group The Great NHS Heist argued that the board “will essentially oversee 100 per cent of NHS assets so all of that property is up for grabs”.

“The amount of land up for disposal has doubled

“Of the 543 plots, totalling 1,332 hectares – worth £282m - 117 are currently being used for clinical or medical purposes.

“However, data on 734 of those hectares, spread over 63 sites, has been held back due to “issues of sensitivity”, the analysis found.”

• The Independent, 9 August 2017 (quoting Labour commissioned research)

This Labour commissioned investigation suggests that property currently used for clinical purposes will be sold.

The report states that only land “which is no longer required to deliver health and care services” will be sold off.

This is somewhat vague: local services could be closed, the land sold off with a centralised service built to replace it. This would be seen as continuing to deliver health and care services, yet for those without cars in areas with poor transport connections it would essentially cut those services off for them.

The report states that: “if provider plans are not embedded in STP plans, which maximise disposals, address backlog maintenance, and deliver the 5YFV, then they would not be eligible to access public capital funding.”

Essentially this means that if Trusts do not “maximise” the amount of land they sell off, then they will not receive funding from the government.

Trusts are also being incentivised to sell off their land as quickly as possible through a 2 for 1 offer where “providers are given additional capital to match their disposal proceeds”.

This ‘deal’ is “time limited with a fixed funding pot and allocated on a “first come first served” basis.”

The report goes on to state that “this will encourage STPs and providers to act quickly to take advantage of this opportunity and discourage them from holding on to land”

The report comes across as mixed on what to do with the sold NHS land.

It recommends that “Land vacated by the NHS should be prioritised for the development of residential homes for NHS staff, where there is a need.”

This vague wording is juxtaposed with another statement, suggesting that the amount of money raised by the NHS could increase if “the NHS adopts a more commercial approach to obtaining planning consent, negotiating affordable housing quotas and maximising value from the highest value sites in London.”

An upper bound limit of £5.7bn is suggested if this more 'commercial approach' is adopted.

The Department of Health was set a target to release “land to build 26,000 homes by 31 March 2020”, yet whether this is achieved, and particularly where this is achieved is yet to be seen.

Affordable housing is desperately needed in London and the South East, where the report admits that “the price of housing is creating recruitment and retention challenges”.

Yet it would seem that Trusts may minimise the amount of affordable housing built on high value sights (e.g. London and south east) and instead sell that land to property developers who would maximise their profit.

This is where private companies put up the money to build and maintain primary care facilities (such as GP surgeries), the NHS then pays rent on these facilities.

The NHS is essentially the tenant and the private firm the landlord.

“Primary Health Properties, Octopus Healthcare and Assura say they are ready to offer £3.3bn upfront capital funding

“They say the money could fund up to 750 new primary care centres, which would cost the NHS up to £200m a year in new rental charges.

 “The companies’ proposed model would see GPs and other primary care providers move into specially built premises and pay rent, as the group would retain ownership of the buildings.

“While the NHS would be paying extra rent for primary care services, the group said it had commissioned research that showed the NHS could save more than £270m annually because the new premises would enable a reduction in non-urgent use of accident and emergency departments, remove pressure on walk in centres, and help increase GP care for the elderly.”

• The Health Service Journal, 14 August 2017

Whilst the premises themselves are likely to save the NHS money, the amount charged by private firms is more than likely to mitigate this and cost the NHS significantly more in the long term.

History shows that when private firms put up capital to build NHS premises, they will charge extortionate rates and lock trusts into long term and inflexible contracts that do not allow the NHS to adapt to new healthcare needs.

Indeed, the leases for primary care centres in these deals would “typically be agreed for 15-25 years, according to Harry Hyman, the managing director of Primary Health Properties.”

The report is very light on details on how these private investments deals will work, although the “privately ran groups say this is ‘not a form of PFI’.”

The other concern is that this will allow greater privatisation of the NHS. The Report states that “30% of GP branches having a list size under 4,000 patients are unlikely to be large enough to meet the vision of person-centred care set out in the 5YFV.”

The Report sets the precedent for allowing large multinational companies to run NHS primary care facilities, in order to bring such services in line with the vision of ‘person-centred care’ the government could ask private firms to run more services.

PFI, or Private Finance Initiatives was first seen in 1992 under the Conservative government led by Sir John Major but became widespread under Labour.

The schemes usually involved large scale infrastructure buildings such as new schools and hospitals which would have previously been funded by the Treasury. Instead, the projects were put out to tender and bids were invited from buildings firms and developers who raised capital, built the premises and then leased them back to the government.

The lease arrangements for PFI projects are long term, often 25 years or longer. Repayments were made over a long time scale, typically between 20 and 30 years but occasionally as long as 50 years and came at a high rate of interest.

This has meant that large debts have accumulated and must now be paid back.

The Treasury does not count PFI debts on the deficit balance sheet. This allows the government to claim it is not borrowing more money whilst being able to build new infrastructure projects.

 “In the short term using private finance will reduce reported public spending and government debt figures.” But, longer term, “additional public spending will be required to repay the debt and interest of the original investment”.

• National Audit Office briefing: March 2015

The UK owes more than £222bn to banks and businesses as a result of Private Finance Initiatives (PFIs).

• The Independent, April 2015

It’s estimated that PFI hospitals currently cost the NHS around £2bn every year in maintenance and operational bills, which equates to more than £3,700 every minute. The funding model has created a situation where the built asset has been designed and constructed in an environment where commercial considerations come first.

• Construction News: 20 July 2017

“At present we will spend around £80bn of public money on hospitals that cost £12bn to build.

“A one hospital for the price of two policy”: PFI finance charges are 1.5-2 times greater than those for public borrowing.

“The supporters of PFI still say that it provides good value as it transfers risk from the public sector. However, the Treasury select committee concluded that PFI was no more efficient than other forms of borrowing and it was “illusory” that it shielded the taxpayer from risk.

“A study of the first wave of PFI hospital found that bed numbers were reduced by an average of 30% in the new hospitals. Research by the Telegraph found that two thirds of proposals to close A&E units occurred at PFI hospitals.

“85% of PFI hospitals are now owned by international investment companies”

• Why we need action on PFI in the NHS: Arguments for an incoming government. NHS Support Federation (2014)

The private investors involved in the new investment schemes have (wisely) said it isn’t.

The report is light on details on how the scheme will work so it is impossible to say how similar this is to PFI.

However, the ‘private capital investment in primary care’ scheme shares many similarities with PFI.

• Both involve a private provider putting up the money to pay for large infrastructure projects, and then leasing the premises back to the NHS.
• Both are more expensive than the publicly funded alternative long-term.
• Both are less flexible than the publicly funded alternative, tying the NHS into a 25 year plus lease does not allow flexibility in regard to future healthcare needs.

Importantly, these plans set the precedent for greater private sector involvement in the NHS, and therefore a greater cut of public money.

Private firms putting up capital for NHS projects has a history of failure and huge expenses. Borrowing more money is not a popular option, especially as the current government has repeatedly stressed its commitment to ‘cutting the deficit’ through austerity. However, private finance initiative schemes are substantially more expensive and less flexible; the government should adopt a long-term approach and publicly fund NHS infrastructure projects.