The resource-draining Private Finance Initiative (PFI)
foisted on public sector projects by New Labour is helping to create the
conditions for the break-up and privatisation of the National Health Service.
The evidence is to be found in two reports over the last 48
hours – from a special administrator appointed following the financial failure
of South London Healthcare Trust and today’s report from the Commons’ public
accounts committee.
Yesterday, a special administrator recommended
that South London Healthcare Trust should be broken up in the wake of its
financial failure. The Department of Health should write off £207 million worth
of debts built up by the trust driven to the brink of bankruptcy by PFI deals,
the administrator said.
It should also provide up to £25 million extra per year to
help continue pay for PFI deals. Two of the trust’s three hospitals were built under
Labour using PFI funding. The trust plans to slash its workforce over the next
five years, from 5,838 whole time equivalents in March 2012 to 4,755 in March
2016.
Administrator Matthew Kershaw said the money spent on PFIs
accounted for around a third of the
trust's £65 million overspend in the last financial year. Nine bids had been
made to take over the trust’s work. The private sector is ready to pounce, with
bids from Virgin Care, Circle, Care UK , Capita and Serco already made.
The PFI albatross is dragging trust after trust into deep
financial crisis, at a time when they are supposed to find £20 billion in
“efficiency savings” (demanded by the previous government) and when the NHS is
being reorganised by the ConDems to create market opportunities for the private
sector.
Margaret Hodge, a member of the previous government and now
chair of the PAC, presumably saw no irony in agreeing the committee’s
report, which says:
“A number of trusts in financial difficulty have PFI
contracts with fixed annual charges that are so high the trusts cannot break
even. Paying these charges is one of the first calls on the NHS budget and the
Department [of Health] is liable for supporting all PFI payments because it underwrites
the Deed of Safeguard given to contractors. It already expects to have to find £1.5
billion to bail out seven trusts facing problems with PFI repayments over the remaining
life of their contracts - equivalent to £60 million a year… The priority given
to meeting PFI annual charges inevitably distorts priorities which is
especially worrying at a time when resources are constrained.”
The rising cost of over 650 PFI projects hit £230bn this
summer and won’t be fully paid off until 2048, according to a GMB
union analysis of the latest Treasury data. Including the £44bn already
handed over for PFI schemes up to 2009-10, the public purse will be hit with a
total PFI bill of more than £270bn which is almost five times the value of the
assets built (£56bn), says the union. “It means that British PFI debt is now
equivalent to £9,300 per taxpayer. Annual payments are forecast to break the
£10bn mark by 2017-18.”
The way that PFI contracts are framed puts them in a weak
position when it comes to renegotiating deals, which can involve interest
payments in double figures and exorbitant one-off charges just getting the
contractor to change a light bulb. So trusts are locked into paying unaffordable
PFI payments.
With another 20 or so NHS trusts in dire financial straits –
despite an emergency £1 billion bail-out last summer – the private sector is
licking its lips. The “failure regime” imposed on South London Healthcare is expected
to be used at other trusts, with bids being taken for the continuation of
services.
While PFI projects – under which contractors own the assets
and lease them to the public sector – began life under the Tory government
1992-97, they were greatly expanded under New Labour by chancellor Gordon
Brown. They were seen as a wheeze to build hospitals and schools on the
never-never, without showing up as public spending, while giving the private
sector a stake. The chickens have come to roost, however, and the NHS is being
lined up for auction as a result.
Paul Feldman
Communications editor
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