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LIFT schemes could be squeezed

2nd April 2009

The Audit Commission has indicated there should be changes over the way private finance initiative-style schemes are accounted for.

Pound Coins

It has ruled that most primary care buildings funded in this way - worth £1.34bn in total - should be moved onto NHS balance sheets this April.

The new accountancy rules that have now come into effect will change the way local improvement finance trusts (LIFT) are accounted for.

The audit body warns that this will impact on the financial positions of primary care trusts by increasing the capital charges they need to pay to central government.

The rule change could also make it harder for schemes to be approved.

Audit Commission head of health Andy McKeon said: "The real issue with LIFT - as with the private finance initiative - is that it is not now a way to get extra capital spending above your allocation. There will have to be a real sense of prioritisation for capital schemes, which will have to be reviewed within the DH’s capital spending limit."

The LIFT Council, which is the trade body for such projects, believes that the accounting issue could be solved through a change in the structure of contracts, to keep them off the balance sheet.

However, a spokesman for the body said there was a view that the government had no appetite for such a move.

Legal expert Bridget Archibald from solicitors Mills and Reeve said the accountancy rule change had seen some PCTs opt for land retained agreement model contracts.

 

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