Placing a major healthcare trust in Whitehall-led
administration could signal the break-up of the NHS under the cover of a
financial crisis that is largely the result of the pro-business policies of
previous New Labour governments.
South London Healthcare Trust, which serves a million
people, runs three hospitals and employs more than 6,000 staff, is in deficit
to the tune of more than £1 million a week.
At the heart of its financial crisis are payments on a
contract to build two of the hospitals.
These were made under the so-called Private Finance Initiative,
which Gordon Brown in particular championed in the 1997-2010 New Labour governments.
Under PFI, the finished buildings are leased back to the local NHS, which pays
mounting interest payments over 25 years and more.
The PFI schemes in south London , which totalled more than £1 billion,
cost more than £60 million annually in interest payments alone. There are also
exorbitant costs for maintenance and small improvements, which the contractors
set fees for doing.
Draft financial plans submitted by the hospitals to the
Department of Health show that it faces a shortfall in its accounts of between
£30 million and £75 million annually over the next five years.
Health secretary Andrew Lansley’s unprecedented decision to
put the trust into administration will lead to a break-up and transfer of
existing services. Some could end up in the hands of the private sector. A
similar fate awaits another 20 hospitals in financial difficulty.
PFI deals became widespread from the late 1990s as a way of
building hospitals and schools without finding the money up front but at
higher-than-average interest rates. The enthusiasm for PFI expressed New
Labour’s championing of the private sector as a “partner” for the public sector.
But this was no equal partnership, with the state
guaranteeing the fulfilment of high-cost contracts. Lansley intends that the
South London PFI contract will be paid directly by his department.
Through a sleight of hand, the costs to the taxpayer do not
figure in public accounts and so do not contribute officially to the budget
deficit (which the Tories have lost control of, if today’s figures are anything
to go by). Nevertheless, the total bill
to the taxpayer over time is estimated at £229 billion on contracts valued at
£62 billion.
In April a biting report by the National Audit Office found
that each household will have to cough up nearly £400 next year to pay for
hospitals, schools and motorways built under PFI.
The City firm Innisfree is the largest single investor in
PFI, with money in 28 hospitals representing over 13,000 beds and 260 schools
educating over 130,000 children. Innisfree’s profit margin was 53% in 2011. PFI
is truly a licence to print money!
Some PFI rip-off examples include:
- A hospital which charged £52,000 for a job that cost £750. Demolishing a shelter for smokers resulted in the PFI contractor charging £2,600 a year for the “extra cleaning”.
- A
hospital in Bromley, south
- An empty school which will cost taxpayers £370,000 a year until 2027. Another school had to pay £302 for a socket, five times the cost of the equipment it wanted to plug in
- In
John Lister, director of campaign group, Health Emergency, described PFI contracts as “a cosmic rip-off
by almost every measure” which led to a “mass haemorrhaging of public cash”. He
says:
“It also means that private sector profits are protected by
legally binding contracts taking an increased share of declining trust budgets,
while clinical services, patient care and the jobs of NHS staff are sacrificed,
in an impossible battle to balance the books as the NHS faces real-terms cuts
for the first time in a decade.”
With the Tories leaving PFI intact and preparing to launch a
market-led health service on the unsuspecting public, the NHS has never been in
such danger since it was founded in 1948.
Paul Feldman
Communications editor
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