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Monitor not responsible for oversized PFI

29th June 2012

An investigation into the private finance initiative arrangement at Peterborough and Stamford Hospitals Foundation Trust has published its findings.

Pound Coins

Carried out by KPMG, the probe focused on how the trust was burdened with a large PFI agreement for a new hospital.

It found that Monitor was unable to prevent the deal but concluded the regulator could have spotted the trust’s slide into deficit earlier and engaged more actively with it.

KMPG say the regulator had “very limited powers to prevent the Peterborough board from committing to an unaffordable PFI in 2007”, although noted the regulator did send a warning letter.

Dated January 2007, and copied to the Department of Health and Treasury, the document raised doubts over the long-term affordability of the proposal.

The letter added: “We believe that your board should consider again the proposal prior to taking a final decision to enter into a legally binding commitment.”

Despite such concerns, the Peterborough and Stamford Hospitals Foundation Trust pressed ahead, telling Monitor it had examined alternative options.

The deal was signed off by the Department of Health and the Treasury but current figures show that trust finished 2011/12 with a forecast deficit of £46m. This followed a £10m bail-out from Monitor in the last quarter of 2010/11, when it became aware of the problems.

In its 10-page response to the report, Monitor said: “One of the main causes of the delay in realising the extent of the challenge was caused by the trust not updating the business case for the new hospital, which was based on unrealistic estimates.”

 

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