New hospital faces 'crippling repayments'

A £411 million Peterborough hospital built under the private finance initiative (PFI) saddled a health trust with crippling repayments, a report has found.

Peterborough City Hospital, which was officially opened by the Duke and Duchess of Cambridge yesterday, became operational in 2010 and aimed to bring services together on one site.

But a National Audit Office (NAO) report found the repayments - which totalled #41.6 million last year - have placed a "considerable strain" on the Peterborough and Stamford NHS Trust's finances as it seeks to make £64 million of spending cuts by 2017.

It added that doubts over the trust's ability to meet repayments without services suffering had been raised but ignored before construction began in 2007.

Amyas Morse, head of the NAO, called for "urgent action" from the trust, the Department of Health and regulators to "get the trust back on its feet". He added: "The trust board's poor financial management and procurement of an unaffordable PFI scheme have left the trust in a critical financial position.

"The board developed and enthusiastically supported an unrealistic business case built on over-optimistic financial projections. The regulatory and approval processes did not work in this case and did not ensure affordability. Irrespective of how far the PFI scheme contributed to the current deficit, the latter is now too great for the trust to balance its finances by managing its own resources."

Last year the trust faced a deficit of #46 million, which is expected to rise to #50 million this year. This is as a result of the PFI scheme, past financial failings and other changes affecting the hospital's income. The capital cost of the scheme as a proportion of turnover was the largest in the NHS at 142%.

Monitor, the regulator of foundation trusts, raised concerns about the scheme's affordability before it was approved. But neither the trust board nor the Department of Health addressed these concerns fully, the NAO said.

Dr Peter Reading, interim chief executive of the hospital trust, said the board acknowledged shortcomings but had put in place "new structures and systems to improve our financial forecasting".

He added: "We are also on track to deliver #13.2 million cost savings in 2012-13. Our patients can be assured that we are working to our turnaround plan which focuses on delivering savings and efficiencies while maintaining the consistently high standards of quality care."

Here's Elodie Harper's report....