One of the ways in which the NHS is being privatised is through the transfer of NHS assets, such as land and buildings, into private hands. Already, a good proportion of the assets owned in the past by Primary Care Trusts has been transferred to NHS Property Services (PropCo), a largely unaccountable body currently owned by the government. More recently, the Naylor Review is calling for a carrot and stick approach to induce NHS Trusts to sell off as much as 30% or more of the buildings and land they own (primarily associated with acute services) to provide the capital for implementing the Five Year Forward View (5YFV)and its Sustainability and Transformation Plans (STPs).
Once any NHS land or property is sold it passes outside the provisions of the NHS Act, so that any future government will not be able to transfer these properties back into state ownership. Land that, until now, has been available to the NHS at minimal cost for the expansion of hospitals or other health provisions will have gone forever. Future development will therefore only be possible either at increased cost to the taxpayer, or by reducing spending on existing health services.
PropCo (or NHS Property Services Ltd)
Following the Health and Social Care Act (HSC Act) of 2012, land or property previously owned by NHS bodies (like Primary Care Trusts) and used primarily for healthcare services was transferred to the ownership of the new Clinical Commissioning Groups (CCGs) set up to plan and buy health services in their area. However, from April 2013, other property (including where 51% or more of the work carried out was administrative rather than clinical in nature) became classified as ‘surplus’ and transferred without charge to a new, unaccountable company, PropCo (also known as NHS Property Services Ltd).
PropCo was set up to manage NHS property and facilities (mostly for GP surgeries, health centres and community hospitals) and dispose of property judged to be surplus to NHS requirements. Its Annual Stewardship Report for 2014/15 says that PropCo would also work closely with NHS England “to support the delivery of the property components contained in the NHS Five Year Forward View” (http://www.property.nhs.uk/what-we-do/).
PropCo receives no government funding and has been expected to generate its income from either selling off ‘surplus’ property, renting its property back to the NHS at a market rate, or renting it to other (i.e. non-NHS) users.
By July 2014, PropCo owned and managed at least 3,500 properties across England (or about 11% of total NHS estate in England), valued at between £3 to 5 billion. The biggest transfer of properties so far took place in December 2016, when the Department of Health decided to transfer the freeholds of 12 community hospitals in Devon to PropCo (http://www.property.nhs.uk/biggest-transfer-of-properties-to-nhs-property-services/).
In April 2016, PropCo – some of whose Board members have declared interests in real estate, property management and facilities management companies – changed the way it calculated rents on freehold properties. As a result, many tenants saw higher rental charges (£60 million a year of additional bills, with some GP practices facing rent increases of as much as 400%).
This change was supposedly “to improve utilisation and value for money in property occupancy” (http://www.property.nhs.uk), although others say it was to prop up PropCo prior to it being floated on the open market. Rent increases were initially reimbursed by the Department of Health, but eventually tenants will be expected to cover the full cost while also facing increases in associated and non-refundable costs like management fees (in some cases charged at higher than commercial rates). Money raised from higher rents was apparently to be earmarked for improving the NHS estate.
All this means significant increases for many taxpayer-funded providers, such as GP practices and community hospitals, especially in areas like London and the South East where commercial rents are high.
PropCo is currently owned entirely by the government. However, it can at any point sell off up to all but one of its shares to private investors. As PropCo was set up with just one share valued at £1.00, the government could issue another 99 shares at £1.00 each and, by selling these to private investors, transfer almost complete ownership, and total control, of huge NHS assets to private owners at almost no cost.
The Naylor Review
The Naylor Review, published in March 2017, is essentially concerned with facilitating implementation of the Five Year Forward View (5YFV) and STPs. It notes that current NHS capital investment is insufficient to maintain existing buildings or fund NHS England’s transformation agenda, estimating
“that STP capital requirements might total around £10bn, with a conservative estimate of backlog maintenance at £5bn and a similar sum likely to be required to deliver the 5YFV.”
The solution proposed by the Review suggests that funding for ‘well-evidenced’ STPs will come from property disposals, private capital (specifically for primary care), and the Treasury. (‘Well-evidenced’ is in quotes because many STPs are notoriously based on flimsy evidence produced by private consultancy firms with vested interests.)
The Review sets out a new NHS estate strategy based on analysis from the private consultancy firm Deloitte. This strategy aims to meet Department of Health targets to release £2 billion of NHS assets for re-investment while making land available for 26,000 new homes. One of the strategy’s main aims is to encourage NHS Trusts to sell off the assets they have that have been deemed ‘surplus’ according to a formula developed by Deloitte. In addition, the Review claims that there is no traditional business case that justifies dealing with the backlog of maintenance that some NHS buildings require. (This seems at odds with the rationale for raising NHS tenants’ rents – i.e. to pay for improving the NHS estate.)
According to Deloitte, the NHS assets that would fetch the most money are heavily concentrated in a small number of STPs: “the top five STPs by value are all in London and represent over 50% of the financial opportunity.”
The Review’s recommendations include:
- Rapidly establishing a powerful NHS Property Board, aligned to NHS England and NHS Improvement, to provide leadership to the centre and expertise and support to STPs – at arms length from the Department of Health, and set up in a way that ensures speedy executive action.
- Setting up a new unit to support major projects.
- Reviewing the business case process, often seen as cumbersome and a block to estates development.
In other words, the sell-off of NHS estate is to be rapid, with sales going through on the nod, with little accountability, and little-to-no opportunity for public consultation or objection.
Despite the huge debts that NHS Trusts have clocked up through the Private Finance Initiative (PFI) and despite the ineffectiveness of the Local Investment Finance Trust (LIFT) to attract private finance for building primary care premises, it seems that the Naylor Review leaves open the possibility of similar private finance deals in future:
“Private finance offers the opportunity to deliver facilities without short-term recourse to public funds. Some providers have had mixed experiences of the cost and inflexibility of PFI and LIFT. However, the current low rates of return and the low risk profile of NHS investments means that there is likely to be no shortage of private capital finance available to the NHS.”
There will be incentives for NHS bodies to sell land, and penalties if they do not:
- Money for the sale of locally owned assets will no longer have to be sent to the Treasury – at least “provided the disposal is in agreement with STP plans”. Instead, the Treasury will match the money raised, but only for a limited period.
- STPs and their providers failing to develop ‘sufficiently stretching plans’ (presumably failing to sell assets defined as ‘surplus’ by Deloitte’s formula) will not be granted access to capital funding – either through grants, loans or private finance.
- The Review seemed to suggest that the capital charge that Trusts currently pay to the Treasury (3.5% on the value of their land and buildings) might be increased for those Trusts that don’t sell ‘surplus’ assets.
Land ‘vacated’ by the NHS should be prioritised for housing, notably the development of residential homes for NHS staff ‘where there is a need’.
The Review raises a potential problem – that NHS providers (like NHS Trusts) tend to hold on to assets like property to fund their own plans or needs. But Sustainability and Transformation Partnerships need the assets held by the providers within their STP overall – yet it’s unlikely a provider will willingly give up property assets to support other organisations, even if they come under the same STP umbrella.
The Review also raises another problem, that STPs have no statutory authority to control these assets (STPs are described in some of the NHS England documents simply as ‘discussion forums’) and they cannot legally impose their plans on other bodies like Foundation Trusts, CCGs or local authorities that do have statutory authority.
To overcome these problems, the Naylor Review wants to see providers given incentives to support integration between primary, community and secondary care through the creation of accountable care organisations (ACOs). ACOs (the model of care that the 5YFV most wants to see adopted) are formed by groups of health service providers who work together to manage and deliver services for a defined population over a set period of time and according to a fixed budget, irrespective of how much care their registered patients need. Some see this particular model of care as ripe for take over by insurance companies if the NHS moves further towards the US model of healthcare. The Naylor Review argues that providers could invest the money they receive from selling off their assets into ACOs that combine primary, community and other services as a way of overcoming “the conflict of interests that currently exist between the “advisory” role of STPs and the statutory responsibilities of NHS provider trusts.”