We have now had more than a decade of Private Finance Initiative involvement in the health service. Despite Labour pouring money into hospitals and health care, more and more health trusts are reporting deficits. PFI is sucking the NHS dry!
The health service is part of the infrastructure of our capitalist society. Capitalism has always been unable to provide a universal health system. In Britain we had a patchwork quilt of charitable and local endeavours for hundreds of years before the NHS was set up in 1948. They still have capitalist provision of health care in the USA. Result – fifty million people can’t afford the insurance, so they are not cared for. Adam Smith, held up as the apostle of free markets, knew that when the market couldn’t provide the government had to step in.
The Tories dreamed up PFI (sometimes called Public Private Partnership) in the dying days of their government. It was gleefully picked up by New Labour as a scam to pay for social programmes off-balance sheet. We have some daft Treasury rules that limit how much the public sector can borrow. But if the private sector borrows the same money for the same purpose, that’s all right then!
What used to happen was this: if we decided we needed a new hospital, we paid the builders to build it. It became a public asset. We owned it. We then paid workers to provide a public service.
Under PFI we pay a consortium to build a hospital. They own it. We are currently paying out £500 million rent for NHS hospitals. We give them some more money – and they employ workers to provide the health care.
What’s the point of this? It is argued that private companies can borrow in the financial markets. But it’s us who pay the interest when we pay them to run the hospital. The public sector could always borrow the money – if the Treasury would let it.
What’s the government problem with public debt? Most people buy a house on a mortgage – a thumping great debt. There’s usually no alternative. Would it make sense to live in a tent in the local park for twenty years until you’d saved enough to put cash on the nail?
It’s not magic money. Usually the private sector will have to pay a higher rate of interest than the government when they borrow money. Financiers assess the return they get from lending against the risk of not getting their monery back. After all they won’t be coining it in if the outfit they lend money to does a runner. But when did you last hear of a government going bust? They’re safe, so they can borrow cheaper.
The government says the private sector is more efficient. But then they tell health administrators (as Alan Milburn did when Health Minister), "It’s PFI or bust." You won’t get the money any other way. So the administrators fiddle the figures to let PFI in. As a result, Jeremy Colman, a big cheese at the National Audit Office has denounced the calculations as ‘pseudo-scientific mumbo jumbo.’ The Coventry case study shows that’s exactly right.
These PFI leeches have first call on money coming in. Health care comes second. In an article in the Guardian on December 11th 2006 a finance director explained, "If a trust spent £105m but had an income of only £100m, it would end the year with a deficit of £5m. The new rules sliced £5m from its income in the following year and obliged it to make a £5m surplus. That required the trust to cut its spending from £105m to £90m. Trusts faced with this triple whammy could not achieve their target without damaging patient care and so their deficits escalated."
According to the reporter, John Carvel, 13 trusts are functionally bankrupt with irrecoverable deficits. So wards are closed and staff made redundant. Not surprisingly the spokesperson chose to remain anonymous, describing the situation as ‘a nightmare from Alice in Wonderland.’
The King’s Fund has worked out that for the latest financial year some health and hospital trusts are running a surplus of £1.42 billion. That’s the good news. The bad news is that other trusts within the NHS are running deficitsof £911 million. So a third of health organisations are in surplus while 22% are in deficit.
The people in charge are all in favour of the commercialisation of the health service. Sir Nigel Crisp, Chief executive, says, " Foundation trusts should adopt the same marketing techniques as Tesco in their bids to win customers in the new choice-based market." What has Sir Nigel got in mind? Buy one hip operation, get one free?
Perhaps someone should tell Sir Nigel that one difference between the NHS and Tesco is that most hospital treatment and primary care is free. The commercialisation of health, of which PFI is part, flies in the face of everything health professionals believe in. It’s inefficient and it doesn’t work. The rhetoric of choice is being used to let in private capitalism into a health service that is still mainly free at the point of use. For how much longer?
The bidding process for PFI is time-consuming and expensive. EU rules say there should be at least 3 bidders. A standard bid will cost £250,000 to mount (some cost many times that). Only one bidder can win. So that’s £1/2m up the chimney before work is started.
What keeps Tesco on their toes is competition with Asda, Sainsbury’s and Morrisons. But when a consortium has their feet under the table, they are effectively a monopoly. They can charge what they like and, as the Coventry case study shows, they fill their boots. It goes on all over. The Paddington PFI bid was £411m. We’d already stumped up £894m before the scheme was abandoned in 2005.
The case of the Coventry hospitals shows:
- PFI creates a private monopoly. They can charge what they like.
- Staff and patients pay for PFI
- PFI is costing us plenty. We don’t need it and can’t afford it!
Many commentators have been amazed at the apparent lack of improvement to the NHS when so much money has been pouring in. When all the PFI projects in the health service are in place, we’ll pay £90 billion just in interest payments on buildings we’ll never own. The reason the cash injection hasn’t worked is that much of this money has been pouring out to the PFI people, without even touching the sides of the health service.
Robbery in Coventry: Case Study
In the Guardian on September 4th George Monbiot gave a
classic example of PFI madness. In Coventry officials wanted to refurbish its
two hospitals. This would have cost £30m. They didn’t have £30m, so they had to
go for PFI. The consortium couldn’t be bothered to refurbish (not enough money
in it) so the health authority devised a plan to knock the two hospitals down
and build a new one – for £174m. George continues, "Did I say £174m? I beg
your pardon. By January 2002 the price had risen to to £290m. A month later it
reached £311m. By the end of that year it was estimated at £370m. In March
2007, the Birmingham Post reported that the final cost was £410m. This year the
hospital trust must find £56m, covering repayments and service fees, to hand to
the private consortium. The annual cost will rise in line with the retail price
index for 30 years…Over the past few days the hospital trust has announced a
£30m hole in its budget. Around £10m of the necessary cuts could be found by
making staff redundant: it will lose
200 people, perhaps 375."
Spend £410m to save £30m! Pay £56m a year and rising
to save £30m! This is where the money pouring in to the health service is