Private Finance Initiatives should be re-opened and renegotiated, a leading public health academic warns.
Since 1997, most large-scale public capital investment in the UK has been through PFI purchasing schemes where investment banks and building companies raise the finance for public infrastructure projects.
In England, 101 of the 135 new NHS hospitals built between 1997 and 2009 were paid for under PFI (90% of the £12.2 billion committed under successive building programmes).
Professor Allyson Pollock, director of the Centre for International Public Health Policy at the University of Edinburgh, says: “NHS PFI contracts are not good value and are endangering patient care”.
Writing on bmj.com, Pollock explains that debt repayments amounting to £42.79bn are due under the contracts and that the annual repayments will increase just when public spending is being cut back.
Evidence of high cost of PFI investment relative to public financing is well established, she says, and the high interest charges set by banks together with returns demanded by equity investors are not justified by the risks involved.
In a number of schemes, annual debt repayments to the PFI consortia were between 1.49 and 2.4 times higher than the amount that would have been charged to the UK government if they had borrowed the money themselves.
The authors call it a ‘one hospital for the price of two’ policy. They add: “PFI interest rates have risen since the banking crisis and are exacerbating the serious financial difficulties of PFI hospitals and the NHS as a whole.”
Last year, a National Audit Office report criticised the contract monitoring of PFI projects and said that some trusts are paying more for PFI services than needed. This lack of control over PFI costs has serious implications for the quality and levels of NHS care, conclude the authors.
Pollock says: “The taxpayer and NHS patient is paying several times over: the multi-billion pound government bail out of the banks coupled with the debts incurred on PFI schemes underpin the current reductions in public expenditure and public services. Cuts in NHS funding and the high cost of PFI debt charges translate into staff redundancies, service closures and reductions in access to and quality of care for patients.”
They question the affordability of PFI in the current financial climate and argue that it is time to reopen and evaluate the contracts.
Read the full report.
Tags: PFI
socialists are rubbish at doing business - nothing new here and clear proof that “new labour” is as economically incompetent as “old labour”
I don’t think it was incompetence in this case Chrissa, although I’d agree with you about socialists and business.
Brown knew exactly what he was doing - he didn’t care how much it cost, as long as it didn’t appear on his government’s balance sheet. Our new cancer wing in Leeds ‘cost’ £220 million. By the time my grandchildren finish paying off the PFI entrepreneurs, the taxpayer will actually have coughed up anything from £700M to 1 Bn, depending who you believe. That’s how Gordo managed to build hospitals and ‘balance’ his budget - by making sure that future governments/taxpayers funded it.
So much for his ‘prudence’.
exactly right bob! gordon is a true socialist - and socialists are bureaucrats first and foremost…
Well it had to happen! We agree on something.