NHS: Private Equity

Question

15:39:00

Asked by

To ask His Majesty’s Government what assessment they have made of the potential risks to GP services and NHS costs presented by the takeover of Assura’s surgeries by private equity providers; and whether they plan to intervene to retain domestic control of such services.

My Lords, Assura’s portfolio of over 500 properties is leased to GPs and other NHS and private healthcare providers. Arrangements for leased properties and their ongoing healthcare are secured through lease arrangements. A change in ownership does not affect their legal status; leases will continue to be set out and protect the terms of occupation for GP surgeries and other NHS service providers. Officials are in dialogue with Assura and prospective purchasers—and will keep monitoring proceedings.

My Lords, I thank the Minister for her Answer. Following Care REIT falling into foreign hands, the board of Assura was happy to sell out to KKR, risking an uncertain future for GP surgeries serving millions of people, rather than ensuring continued UK ownership to support NHS current and future infrastructure. The dangers of allowing overseas takeovers and private equity buyouts are written in the wreckage of our care home sector. I have two questions. First, what power do the Government have to prevent further erosion of UK critical infrastructure? Secondly, do His Majesty’s Government recognise the damage caused by the FCA to so many such real estate investment trusts, and other investment trusts, which own and manage critical UK infrastructure? The exaggerated so-called investor costs have led to unwarranted under- valuation. Therefore, foreign bidders come in and take the opportunity to snap up our future infrastructure for short-term gain, denying those opportunities to pension funds, which are the ideal long-term investors for such companies.

I understand the noble Baroness’s concern, but perhaps I could assure her and your Lordships’ House that it was decided this week by the board of Assura to recommend to shareholders an offer from Primary Health Properties, which is another UK real estate investment trust, similar to Assura, which is focused on primary healthcare premises. It is the case—or was the case, depending on how you look at it—that there was another bidder for Assura: KKR. As the noble Baroness said, KKR is an American private equity and investment company, but it seems very unlikely to be successful at this stage. The assurance I can give the noble Baroness is that a change in ownership does not affect the legal status of existing lease arrangements. I would also say that the ownership of the general practice estate is very much a mixed model in which GP practice buildings can be leased from a variety of landlords, including companies such as Assura, which actually constitute quite a small proportion of the overall estate.

My Lords, given that there are a vast number of overseas investments in different areas of private medicine in London—for example, in vitro fertilisation, much surgery, and so on—can the Minister tell us whether there is any fundamental difference between this and Assura healthcare? Providing it is under the proper regulation of the NHS—which I believe it is—there is no particular harm that we can identify.

My noble friend is quite right. What matters is the assurances that are in place to enable provision to be made, whether that is on the estate or on services, as my noble friend refers to. I can certainly assure your Lordships’ House that in preparation for this discussion of course I asked the question: are there risks? I am assured there are no risks about which we need to be concerned.

Will the Minister look at the National Security and Investment Act 2021? This gives the Government the power to designate a sector as having particular importance for the future of our country. It might be appropriate, when we are dealing with healthcare, which is obviously a key part of our infrastructure, for this to play a role in the sorts of issues she is tackling when responding to this Question today.

I am grateful to the noble Lord for his suggestion. This was another area I raised with officials who have been in contact with Assura and the proposed new company, Primary Health Properties plc. The implication, I believe—I am sure the noble Lord will happily correct me outside the Chamber if this is not the case—is that somehow the Government should take on this responsibility. This would be a significant cost because the Government would have to offer in excess of the £1.79 billion currently offered by PHP and, in addition, take over £2 billion of debt raised against the properties which is secured against future rental income streams. I hope that gives some idea of the scale. There is also no strategic imperative. I understand the concerns, but the market is currently delivering, and it is expected to continue to do so.

My Lords, this raises a wider question regarding the NHS primary care estate. Will the Government look seriously at implementing new controls and transparent pricing benchmarks to prevent overseas investors not just imposing exploitative rents but producing punitive dilapidations, which is where they will make their money when they return the estate to the public sector?

The noble Lord raises an important point. I assure him that rent and service charges continue to be set in line with the original terms if there is a change of owner. Whatever the ownership, properties occupied by GPs are required to be professionally valued by the district valuer. The service advises commissioners on whether levels of rent are value for money and align with market rents in a particular area. The other thing I might add, which I mentioned in answer to an earlier question about the mixed model of the general practice estate, is that nearly half of them are in any case GP-owned and 26% are GP leasehold. We do not currently see a problem in the way the noble Lord describes, but if there are particular examples to follow up, I am very happy to do so.

My Lords, the private sector has a significant role to play in alleviating the pressures faced by the NHS. Please allow me to quote the Secretary of State for Health. He said the independent sector can “help us out” and: “We would be mad not to”. Can the Minister help us understand why a number of experts in your Lordships’ House are saying outside the Chamber that there is currently excess capacity in the private sector at benchmark NHS prices? There would be no extra cost to the taxpayer but huge incremental benefits to people on NHS waiting lists. However, the spare capacity is not being used.

Again, if there is particular information I should have, I would be delighted to receive that. I can only wholeheartedly agree with my right honourable friend the Secretary of State about the need to use capacity in the private sector. It is one of the ways we are driving down waiting lists and offering more appointments. As I am sure the noble Lord knows, we committed to 2 million extra appointments in our first year of government; we have far exceeded that already with 3.6 million.

My Lords, I accept what the Minister said about how the leasing arrangements will remain the same. But can we be assured that both KKR and PHP—whichever wins the bidding war—will follow the same procedures; that is, they will be responsible for providing the equipment and the rents will not increase based on what equipment they provide, and that, therefore, patient care will remain of the highest quality?

I thank the noble Lord for seeking that reassurance, which I can indeed give.

I beg noble Lords’ indulgence. Will the Minister answer the second question I asked about how our infrastructure, such as these properties, is selling at hugely undervalued levels on the market because of a technical issue relating to regulations imposed by the Financial Conduct Authority?

I fear I am not able to answer in the detail that the noble Baroness would like, but I would be delighted to write to her.