Ex-MP Evan Harris criticises NHS 'tax havens' Published duration 12 April 2011

image caption Work on John Radcliffe's Children's Hospital started in 2003

Former Oxford MP Dr Evan Harris is calling for new rules to stop NHS money being sent to "tax havens".

It comes after the BBC found a leading bank set up a Guernsey-based firm to divert millions of pounds of NHS money.

HSBC used a legal tax loophole to handle profits from private finance initiatives (PFIs) like one at John Radcliffe Hospital in Oxford.

Over the next 25 years money will go to HICL. The firm said it was subject to UK tax laws.

HSBC said it set up the scheme to give people a chance to invest in PFI projects.

Dr Harris said the practice was scandalous.

UK shareholders

He said the NHS should be prevented from doing business with companies that engaged in large scale tax avoidance using offshore "havens".

In six months last year HICL - which was set up by HSBC - made more than £38m profit from its 33 PFI schemes around the country and paid £100,000 in UK tax.

That equates to less than half of 1% of the profits.

HICL said the profits did not stay in Guernsey and had been paid to mostly UK shareholders so far.

This year the John Radcliffe (JR) Hospital is paying £28m to HICL, which owns an 89.9% stake in the PFI, and the repayments continue to increase until 2036.

This money covers the hospital's 30-year, £134m, PFI and includes payments made to the PFI provider for facilities management services.

Original funds were used to build its children's hospital and its new west wing.

The BBC has discovered that any profit left is then sent out of the country, via two firms in Luxembourg, to HICL in Guernsey.

image caption Dr Harris said the NHS should not use firms which engaged in large-scale tax avoidance

Tax specialist Nick Parker said: "They are obviously trying to minimise the tax that they pay, but they are clearly paying UK tax, on their UK projects.

"The accounts to 30 September 2010 indicate there was a £2.5m tax charge, however when you actually read the notes only £100,000 of that was actually paid across to the UK authorities."

John Lister, from Oxford, runs the Campaign group Health Emergency.

He criticised the whole idea of PFI schemes saying that the original £134m bill for JR Hospital's new buildings will eventually cost the hospital £1.4bn over the 30 years of the contract.

'Bonus rip-off'

He said the fact that money was being sent offshore "just added insult to injury".

"PFI was always going to be a rip off, this is just adding an extra bonus rip-off to the bankers who were going to be sat happily for 30 years anyway at the NHS's expense."

HICL - previously known as HSBC Infrastructure Company Limited - said its UK assets were subject to UK taxation on the same basis as any company and without that investment certain hospitals would never have been built.

It said profits from all its projects had so far gone to mostly UK shareholders including local authority pension funds and small investors.

The firm said the £100,000 tax payment was "low because profits are offset against previously incurred losses in the UK assets".

"As a listed public company HICL publishes all its trading and financial information," it said.

HSBC said it did not set up the scheme to divert funds from the NHS but to give people a chance to invest in PFI projects.

It said it owned no shares in HICL and did not take a profit from it.