Propco and the Health Act: the great NHS property scam

wrote on Friday about the provisions in the NHS Act that would allow a Labour Health Secretary to transfer all transferred NHS assets back to the state, and called on Andy Burnham to make a strong commitment to doing so.

Further reading of the Act, as well as a few conversations on Twitter and elsewhere (especially with @richardblogger) have brought into even clearer focus the true extent of the dangers of the ‘transfer scheme’ provisions of the Act – and the way in which the hapless Andrew Lansley, and now new Health Secretary Jeremy Hunt, are positioned to use it in order to achieve an irreversible giveaway of public NHS assets into private hands. Not only that, but such transfers need not even result in such assets being used for health purposes.

The relevant passage in the Act is paragraph 300.8:

(8) In this section and Schedules 22 and 23, “qualifying company” means—

(a) a company which is formed under section 223 of the National Health Service Act 2006 and wholly or partly owned by the Secretary of State or the Board, or

(b) a subsidiary of a company which is formed under that section and wholly owned by the Secretary of State.

Section 223 of the 2006 Act, which the passage above refers to, says:

Public-private partnerships

(1) The Secretary of State may form, or participate in forming, companies to provide facilities or services to persons or bodies exercising functions, or otherwise providing services, under this Act.

(2) The Secretary of State may, with a view to securing or facilitating the provision by companies of facilities or services to persons or bodies falling within subsection (1)—

(a) invest in the companies (whether by acquiring assets, securities or rights or otherwise), or

(b) provide loans and guarantees and make other kinds of financial provision to or in respect of them,

or both.

(3) For the purposes of subsections (1) and (2) it is immaterial that the facilities or services provided or to be provided by the companies in question are not provided or to be provided 

(a) only to persons or bodies falling within subsection (1), or

(b) to persons or bodies falling within subsection (1) only in their capacities as persons or bodies such as are mentioned in that provision.

Legalese is not easy to follow, but bear with me and I’ll try to tell you what it means in plain language:

1) The new Act allows the Health Secretary to form companies in partnership with private money.

2) The new Act allows the Health Secretary to transfer any NHS property or staff to such companies.

3) The Health Secretary only need have partial ownership of such a company. This means, in principle, that only a single share of such companies need be owned by us via the Health Secretary – and such a company will still be eligible to receive a free transfer of NHS assets.

4) The 2006 Act (an insane provision by a Labour government but I doubt they foresaw how Lansley would use it) says that it doesn’t matter whether the companies so formed only use the assets to provide services to the NHS.

In other words, the 2012 Act uses the 2006 Act to allow the Health Secretary to give away NHS assets to a company or companies that can be 99.99999% privately owned.

It’s unquestionable that we haven’t seen the full outworkings of this devilish provision yet, but the Tories were not slow in getting started. In December last year – well before the Act was even passed into law – it formed PropCo, otherwise known as NHS Property Services Ltd. When Primary Care Trusts and Strategic Health Authorities are abolished in April 2013, every square foot of what is deemed ‘surplus’ NHS land or property will be transferred to PropCo free of charge.

PropCo is listed at Companies House as a standalone company, and is currently 100% owned by the government. However, because of the above-mentioned provisions in the 2012 and 2006 NHS Acts, the Tories will be free to sell off all but one share of PropCo to private investors at any time it chooses.

PropCo was formed with a single share, valued at £1.00. This means that in principle the government could simply issue another 99 £1.00 shares and sell those to a private interest and in doing so, give almost complete ownership, and total control, of vast NHS assets to private owners at almost zero cost. While it’s unlikely to do it quite that cheaply because of political considerations, this set-up means that the government can sell off ‘confiscated’ NHS assets at any price it chooses, and is likely to do so at far below its market value.

How much NHS property is being confiscated? At least £5.2 billion, and quite possibly more. Land or property that currently belongs to PCTs and is being used directly for the provision of healthcare will transfer to the ownership of the new Clinical Commissioning Groups. But any land or property that is not being used primarily for direct provision of healthcare is considered surplus and will be transferred to PropCo.

How is this worked out? According to @richardblogger, whose excellent blog on the NHS you can read here, the government is using a straight 50/50 basis. In other words, if a property is used 51% admin and 49% for direct health care provision, it’s counted as an admin building and will be transferred to PropCo. PropCo will receive no government funding and will be expected to raise its income from either selling off ‘surplus’ property or else by renting it back to the NHS, or to other types of user.

So if, let’s say, a building houses admin functions and also an outpatients’ facility, it’s likely to find itself part of PropCo’s property empire. If the CCG wishes to continue using the building, it will have to pay rent to PropCo. If not, it will have to rent commercially somewhere else – and PropCo plans to charge market rents, so either way NHS rental costs for non-clinical facilities will inevitably rise – despite the Tories’ insistence that they’re trying to make the NHS more efficient because we supposedly can’t afford to maintain it as it is.

And here’s where the 2006 provisions – as misused by the 2012 Act – kick in. Since the Act says that transferred property PropCo (and any other companies the government chooses to form and potentially sell off) obtains does not have to be used primarily or even at all for the purpose of providing health care. PropCo is free to do what it likes with the confiscated assets – rent them out as offices, bars, or anything else, or sell them off completely.

The government has already stated its aim of ‘releasing’ ‘excess’ NHS land for house-building. We need more housing, so that might sound fine, but it gives access to private housebuilders to build any kind of housing (there’s no insistence on any affordable housing, and the government is already planning to allow housebuilders to opt out of any affordable housing conditions included in planning permissions). PropCo will be entitled to dispose of land as it sees fit, so there’s no guarantee that land will be sold only at full market rates, allowing buyers to get a bargain and fatten their profits.

And, in principle, there’s nothing stopping the government selling shares in PropCo to housebuilders etc so that they can access land or influence the price at which is it sold, bringing it well below their true value – effectively yet another taxpayer subsidy of private profits.

Worst of all, any land sold off by PropCo will pass outside the provisions of the NHS Act, meaning that a future Labour Health Secretary will be unable to transfer them back into proper state ownership. Land which is currently available to the NHS at minimal cost for expansion of hospitals or other health provisions will have gone forever. CCGs (or whatever entity is in place in the future) will have to be bought or rented at hugely increased cost – which will only be possible either at increased cost to the taxpayer, or by reducing spending on other health services.

This irreversible aspect of the scam means that it is not enough for the Labour Party to commit to transferring all staff & assets transferred to PropCo and other ‘qualifying companies’ when it returns to power. By that time, vast tranches of land and huge numbers of buildings could be lost to the NHS and the British taxpayer forever. Labour – and the public – need to take immediate action, including (but by no means limited to!):

– a challenge to the legality of these provisions of the Act (based on the risks of abuse leading to taxpayer loss that effectively constitute a theft or whatever other grounds can be found) to delay the transfer and minimise the sell-offs of either property or shares in NHS Property Services Ltd that can be achieved before the next election.

– a concerted media campaign to raise public awareness of this criminally clever scam.

– public protests to make sure that the government cannot claim any kind of public approval for its measures.

– determined efforts by you, me and everyone who cares about the NHS (or for that matter about not being ripped off as a taxpayer!) to spread the word and ensure that as many people as possible are informed, aware – and ready to join the action.

This is a ‘government’ that is shameless in its determination to enrich a few at the cost of the many. It has no mandate, no morals, no conscience – and we need to use every legal means available to slow down its destruction of our society and state until it can be voted out at the next election.

If you want to read more about this scam, here are some links to excellent info and commentary:


and an 8-minute video: http://www.youtube.com/watch?v=TfKomASpj8M&feature=plcp

As well as those blogs, for excellent reading on general NHS issues, this blog by Dr Rita Pal is well worth following:



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