Cash-strapped hospitals in England face a £322m tax rise from April which threatens to increase the strain on the under-pressure NHS.
Changes to the business rates system mean that the 1,249 NHS hospitals liable for the property tax will see their bill increase by 21% over the next five years, according to research conducted for the Guardian by property consultant CVS.
The total bill faced by hospitals will rise from £313m this year to £377m a year on average for the next five years. This annual increase of £64m would be enough to pay for nearly 2,500 more junior doctors.
The hospitals facing the most severe increases include the Queen Elizabeth hospital in Birmingham, which will see its business rates bill more than double from £2.8m a year to £6.9m, while the Royal London in east London will see bills rise from £6.3m to £9m.
The revelation of the increase comes after the Royal College of Physicians (RCP) and a host of senior doctors warned Theresa May in a letter that hospitals are “paralysed by spiralling demand” and the NHS “will fail” without an emergency cash injection.
The increase in business rates is a result of a revaluation of property in Britain. This is supposed to take place every five years but the previous revaluation was controversially delayed by the government for two years, making the change in bills from April more pronounced.
Charging business rates to NHS hospitals is controversial. Some private healthcare providers, such as Nuffield Health, enjoy an 80% discount because they are registered as charities.
More than 100 NHS trusts, roughly half of the acute trusts in the country, wrote to local authorities last year claiming they should be eligible for the discount and a £1.5bn rebate. The trusts are being represented by Bilfinger GVA, a property consultancy. Although their request was rejected, they are now understood to be considering legal action in what could become a major test case.
Stephen Graves, chief executive of the Peterborough and Stamford hospitals NHS foundation trust, warned that his hospitals will have to cut more costs to pay for a 43% increase in rates.
He said: “The trust has seen an increase on business rates of £1.2m, which is an increase of 43% in a year. This has created a rise from £2.7m to £3.9m, which means that the trust will now need to put additional cost efficiencies in place, on top of the savings that we had already planned for, to ensure that we reach our financial control total for next year 2017/2018.”
A spokesperson for the Barts Health NHS trust, which includes the Royal London, added: “Like every trust in London, we have been aware of the coming changes in business rates and we have plans in place to meet our financial obligations.”
Bilfinger GVA warned that hospitals faced an “exponential” increase in their tax bill. A spokesperson said: “Increases in rateable values [of the hospitals] and the liabilities [tax bill] are largely due to a hike in building costs and tender prices for new hospitals, part removal of age and obsolescence allowances for hospital buildings built in the 60s and 70s, a removal of multi-floor allowances, the inclusion of multi-storey car parks, and long stay exemptions for patients sectioned under the Mental Health Act and for those patients whose length of stay exceeds 60 days.”
However, local authorities, which receive around half of the revenues raised from business rates, defended taxing hospitals and pledged to fight attempts for them to be re-registered as charities.
A spokesperson for the Local Government Association said: “The LGA continues to support member councils who received applications for mandatory relief from business rates on behalf of a number of NHS trusts.
“We remain of the view that NHS trusts and foundation trusts are not charities and therefore not eligible for mandatory non domestic rate relief. Following legal advice, affected councils have responded to further letters from GVA setting out that their arguments for relief remain unfounded.”
A spokesman for the Department for Communities and Local Government said: “This revaluation improves the fairness of rate bills by making sure they more closely reflect the property market. Rateable values are set independently by the Valuation Office Agency, which uses a widely accepted method to assess NHS hospitals. We’ve also given local authorities the powers to grant additional business rate relief as they see they fit.
“Overall nearly three quarters of properties in England will see no change or even a fall – including 600,000 who from this April will have their bills cut altogether.”
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