State 'to earn €280m' from lease of lands for private hospitals

MILLIONS WILL be paid to the State each year by the Beacon Medical Group to lease public lands for the construction of co-located…

MILLIONS WILL be paid to the State each year by the Beacon Medical Group to lease public lands for the construction of co-located private hospitals, its chief executive officer has said.

Michael Cullen, head of the Beacon Medical Group, said yesterday that around €280 million in today’s cash terms will be paid to the State for the lease over a 65-year period of land for three co-located hospitals.

The hospitals will be built by Beacon on the grounds of Cork University Hospital, Beaumont Hospital in Dublin and the Mid-Western Regional Hospital in Limerick.

Mr Cullen said he could not disclose the precise rent to be paid for each site “due to ongoing co-location tender negotiations in other hospitals”.

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However, he said he had no difficulty making public the fact that “the net present value today to the State of the rent receivable in Beaumont, Cork and Limerick is over €280 million for the term of the lease”.

He added that the annual rent payable for the public lands on which the hospitals will be built was linked to inflation.

Mr Cullen said each of the three hospitals would create around 500 jobs, and that these employees would contribute around €870 million in today’s terms to the Exchequer in PAYE/PRSI payments over the 65 years.

When corporation tax, VAT and stamp duty payments were taken into account, he estimated that the net gain to the State from the three hospitals over the lifetime of the leases would be €1,700 million. When all eight co-located hospitals were built the gain to the State would be over €4 billion, he claimed.

Mr Cullen issued the figures in response to claims by Labour party leader Eamon Gilmore that the plan to build private hospitals on public hospital grounds would cost the Exchequer €1 billion in lost tax. Mr Gilmore based his calculations on a briefing document from Taoiseach Brian Cowen, which stated there would be a loss of €80 million in private health insurance income to six of the public hospitals where co-located hospitals would be built, as private patients would transfer over to them. The document also said the cost to the State of tax relief to investors for each €100 million of qualifying capital expenditure on the co-located hospitals would amount in gross terms to €41 million, spread over seven years.

Mr Cullen said that overall, contrary to what Mr Gilmore claimed, the State would gain financially from the co-location project, in addition to the health system getting extra hospital beds.

He conceded that the Beacon Medical Group hoped to gain financially from the initiative. He said the group hoped to “make a lot of money” from the co-located hospitals in the long term, but would have to borrow €800 million to build the first three hospitals.

Minister for Health Mary Harney, in a statement, hit out at Mr Gilmore’s comments. She said: “We have always set out that the co-location policy includes costs to the State, in terms of capital allowances and the removal of bed charges for private patients in public hospitals.  We have also set out from the start that the benefits greatly outweigh the costs.”