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Democorruptcy

NHS to borrow 10bn from Hedge Funds

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The NHS (or any other government body) shouldn't be allowed to borrow money independent from government.  It sounds very dangerous.  Government departments aren't like 'commercial company departments' even if they like to think that that is how their funding works (internal markets, etc) -- they have a completely different remit.  In a 'company department' there is an absolute remit to maximise income and minimise expenditure, to maximise profit.  Because of commercial constraints, this pretty much works out as minimise expenditure.  In a government department there is an absolute remit to maximise expenditure and try to match that with income (note, not the other way around).  If they start issuing bonds then they'll just use it as 'income', then come back and ask for more.  Oh, they'll cry that it is for 'strategic investment' or 'one-off optimisation costs' or whatever, but it isn't -- it is about spending more money.  If they get the ability to issue bonds then it will continue until it breaks the department or the government of the day, and given it is the NHS I'd say it'll just keep on going until the government breaks (probably with the result of privatising the NHS).

WRT the specifics -- the devil is always in the detail (just like PI/PFI, although you didn't need to look for long to see how ridiculously bad a deal those were).  They might be issued at 1.1% but there'll be all sorts of caveats.

 

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Refinance PFIs could make sense I guess? Would £10bn be enough? I know one or two councils and hospital trusts have succesfully bought themselves out of the agreements at a significant saving. 

 

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42 minutes ago, 200p said:

Look where the money flows.

That's the question.  According to the article it's needed for infrastructure (whatever that means in NHS terms) and maintenance/building repairs.  So it should be allocated and ring fenced to specific and costed items of infrastructure and maintenance.  More likely that particular lot of money will just disappear unaccounted for once it's deposited.

Seeing as they complain about being stretched to serve the increasing numbers of patients shouldn't at least some of it be allocated to that as priority.  

Apart from anything else it's a surprise that the NHS owns the buidings as under PFI weren't they going to do away with that sort of thing (building ownership) - they were just going to pay prodigious amounts to lease them? - so in that case why would they be responsible for maintenance.

 

Edited by billybong

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Does it suggest that the government itself is having difficulty raising debt money in order to fund the NHS?

Of course it's likely that a new department will be necessary to administer it all in addition to the government department currently administering the funding. 

Presumably it has to be guaranteed by the government otherwise if the NHS defaults (probably unlikely) the liabilty could be complicated.  

So they're effectively doing some of the government's administration for them in terms of raising money - but it's very likely that before very long they'll be into full off-balance sheet mode and soon afterwards the wheels will fall off.

Edited by billybong

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23 minutes ago, billybong said:

Does it suggest that the government itself is having difficulty raising debt money in order to fund the NHS?

Of course it's likely that a new department will be necessary to administer it all in addition to the government department currently administering the funding. 

Presumably it has to be guaranteed by the government otherwise if the NHS defaults (probably unlikely) the liabilty could be complicated.  

So they're effectively doing some of the government's administration for them in terms of raising money - but it's very likely that before very long they'll be into full off-balance sheet mode and soon afterwards the wheels will fall off.

The rating agencies gave councils Triple A ratings because the governbankment would act as lender of last resort.

e.g. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8820498/Birmingham-given-AAA-credit-rating.html

Though some of the councils were downgraded after Brexit.

http://www.room151.co.uk/treasury/councils-confident-about-finances-despite-moodys-brexit-downgrade/

Like that article suggests it's not just councils with credit ratings, it's also housing associations. These handle what used to be council housing, i.e. what was just a sub-section of the council. Yet they have CEO's on 100's of £1,000s a year. 

 

It's all off balance sheet governbankment borrowing, so the chancellor can stand up at the next budget and say "the debt is down blah blah blah....".

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25 minutes ago, Democorruptcy said:

The rating agencies gave councils Triple A ratings because the governbankment would act as lender of last resort.

e.g. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8820498/Birmingham-given-AAA-credit-rating.html

Though some of the councils were downgraded after Brexit.

http://www.room151.co.uk/treasury/councils-confident-about-finances-despite-moodys-brexit-downgrade/

Like that article suggests it's not just councils with credit ratings, it's also housing associations. These handle what used to be council housing, i.e. what was just a sub-section of the council. Yet they have CEO's on 100's of £1,000s a year. 

 

It's all off balance sheet governbankment borrowing, so the chancellor can stand up at the next budget and say "the debt is down blah blah blah....".

Thanks for the links.

Just to say that (as you will know) according to the OP's politicshome link it's the NHS borrowing the money directly and apparently not through councils (or government).  It's apparently in addition to and separate from the lending provided via councils and government to the NHS.

Assuming that's correct that's what seems to be remarkable about it.  

Indeed it's off the governbankment's official balance sheet and they can brag about the debt being down (good point) but what I meant by before very long they'll be into full off-balance sheet mode is that the NHS, hedge funds and lenders will likely soon find a way to get it off the NHS balance sheet as well - despite the NHS still being liable for it. 

The NHS must already be in so much debt to councils and government one questions how it can get a credit rating to take on so much extra debt off its own bat - except that the government will have to guarantee it.

Edited by billybong

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