3.19 The new arrangements require the Trust to pay the construction costs over the course of the construction, instead of spreading the costs of the construction over the 30-year operating period of the PFI contracts. The Trusts will also have to pay VAT, generally at 20%, on the new construction contracts and some other costs, whereas they did not have to pay VAT on the PFI contracts.
3.20 The Trusts are receiving additional support from the Department of Health & Social Care and NHS England & NHS Improvement (NHSE&I) to support these immediate costs. This includes an increase in their public dividend capital, which acts as a non-repayable loan from NHSE&I at 3.5% a year. The combined effect of this is that the Department and NHSE&I are paying for the front-loading of the project costs and the Trusts will be financially better off overall than if the PFI contracts had gone ahead as originally planned (Figure 9 and Figure 12).15
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15 This calculation is based on the estimated cash outlay over 30 years. We have not evaluated whether this impacts the Trusts' duty to break even, which is based on their near-term financial performance.