NHS plan to transfer PFI hospitals to charities

NHS trusts are planning to keep their private finance initiative hospitals off the balance sheet by handing them over to specially created charities, according to financial experts.

The move has been prompted by new PFI accounting rules which come into force next year. The rules will see most PFI schemes move onto the public sector’s balance sheet.

Fears that this could land previously financially healthy Trusts with massive debts has prompted some Trusts to look for innovative accounting solutions.

Greg McIntosh, a director of accountants at KPMG, told Health Service Journal that a number of options are being explored which centre on the  residual value of the PFI deal – the value of the hospital building or asset at the end of the PFI contract.

McIntosh said: "It's very difficult to get around the control test. So the only way is to give up control of the residual. Some trusts are looking at setting up a special vehicle to perhaps dispose of the asset to a charitable trust."

Ernst & Young partner Amin Mawji told HSJ that transferring a PFI asset to a charity was possible under the rules. "The difficulty is that they change the economic substance of what you have," he said. "But if the trust is willing to forego the financial benefits of retaining the residual value, then it can achieve an off balance sheet treatment."

However he did not expect any deal to be cut as yet as Trusts are awaiting Department of Health guidance on how the new accounting rules will affect them.

Health unions are expected to oppose any such move. Unison head of health Karen Jennings said: "These hospitals have been paid for by the taxpayer and should be owned by the NHS and accountable to the public."