The PFI Scandal
At our recent public meeting Mary Burnett gave this sobering and terrifying summary of the PFI scandal.
I want to talk about the scandal of Private Finance Initiative, PFI. How PFIs have turned our hospitals into investment and profit making opportunities for private companies and big banks. And how I think this amounts to the most insidious privatisation of our health service, that is barely talked about either in the media, or by most of our politicians.
When WX, Newham and Barts & the London merged in 2012 it became the biggest hospital Trust in the country. With the biggest PFI – used to build the new Royal London and to redevelop Barts. These hospitals cost just over £1bn to build, but Barts will pay more than £7bn over the 42 years of the PFI contract.
And Barts now has the biggest hospital debt in the country – over £93m.
In 2002 George Monbiot wrote in “ Private Affluence, Public Rip- Off” “ A study by a consultancy company which works for the DoH shows that every £200m spent on PFI hospitals will result in the loss of 1000 doctors and nurses. The first PFI hospitals contain some 28 fewer beds than the ones they replaced”.
And in an article in the Guardian in 2013 John Lister wrote : “ PFI is the reason why – no matter how many mgt consultants are paid £1000s a day, or what horrific plan an administrator might hatch up – there is no solution within the Barts Trust without wholesale cuts in services and staffing that would potentially put patient care at risk”.
And that’s exactly what’s happened. Before it was built, the 2 top floors at the Royal London were mothballed. There are now plans to have a wing there for private patients – despite ambulance queues at WX.
And in 2013/14 we saw posts cut, staff downbanded, Charlotte’s dismissal, staff leaving, a growing culture of bullying, rising agency costs, – all culminating in the CQC report on WX and Barts → special measures.
So why do PFIs destabilise hospitals? Why are they such a scandal?
PFIs involve private companies, and investment banks raising loans to build hospitals ( or schools, roads, prisons ).The companies/banks then own the buildings – at least for the duration of the contract, and any services or maintenance are tied into the contract. It’s been likened to taking out a mortgage for your home and having any maintenance, repairs, decoration, provided by one specified company, and tied into your mortgage contract.
So at Barts, Skanska and Innisfree – a construction and investment company respectively – own and operate the PFI. Barts leases the hospitals, and pays Skanska and Innisfree a charge that includes capital costs, interest repayments, and the cost of the services. This year that charge is £2.5m a week. In 10 years it will increase – because the interest is index linked – by a massive 26% to £3.2 m a week. That’s the pressure that results in cuts.
And across the country we have 118 hospital PFIs and 720 PFI contracts in total.
So what’s the scandal?
1) The interest being paid to banks and private investors is at least 1.5 – 2 % higher than if the hospital had been funded through govt borrowing. And for some of the loan, the interest is as high as 15%. Barts is £93m in deficit this year, and paid £43m in interest alone on its PFIs.
2) And there’s a whole market in companies refinancing the debt and selling on their shares in PFIs. Between 1998 and 2010 there were 166 transactions in shares held by companies in health PFIs. Not only does this show the confidence investment banks and business have in the profits they can make, it also illustrates, with alarming clarity, how much our hospitals have become enmeshed in the financial markets. And the amounts being made can be quite staggering. Carillion, for example, has had shares in more than 17 hospital PFIs and boasts they lead the market in selling them on. They made a cool £12m on a £4m investment in a hospital in Kent, and nearly £20m on a £12m investment in Portsmouth.
3) And profit making doesn’t end with high interest rates or selling shares. The services provided through the PFI contract can be a nice little earner for those involved.
– Skanska and Innisfree took £22.7m in 8 years just for buying in the services as part of the Barts PFI contract.
– The contract at Barts to provide services like portering, cleaning and catering is worth £30m a year to Carillion
– and last year Barts managed to withdraw 3 services from the PFI contract and saved 50% on the costs.
4) And when profits drive service provision, it’s no surprise that staff and quality can suffer. Carillion is mired in controversy at the Gt Western Hospital in Swindon, where it provides, under a PFI contract, like at Barts, services like portering, catering and cleaning. There’s been such problems with the services that the Chief Exec of the Trust said in September 2014 : “ concerns about food hygiene and cleanliness have posed a potential risk to patients, visitors, and staff which is completely unacceptable”. The Chief Exec added : “ there remain serious concerns about Carillion’s ability to deliver services to the required standard”
Over the next 5 years, the cost of the Barts and Royal London PFI will increase by £14m a year – 11%
And in the next 5 years, Barts has to make cuts of £324m – 5% of its turnover.
It’s not do-able.
I believe our hospitals should be places where sick people, at their most vulnerable, can get good care and treatment. Where staff are valued, and where management can focus on the quality of patient care, not on achieving impossible financial targets.
PFIs are haemorrhaging money away from that patient care. They have turned our hospitals into investment and profit making opportunities.
That is the scandal of PFIs.
So What Can We Do?
– Tell people you know about the scandal of PFIs. Break the silence around PFI.
– Find out more – there’s plenty of information out there and good websites to be found on the back of our leaflet
– Sign our petition calling for an end to the PFI at Barts – there are paper copies at the back or you can sign on line on 38 degrees website
– Join our local campaign or the Barts pfi campaign – there are details on our leaflets.