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13 August 2010

The folly of PFI exposed

The cost of hospital building will put huge pressure on the NHS at the worst possible time.

By John Ashmore

The time to say “I told you so” might have arrived for Public Finance Initiative naysayers. The BBC reports today that due to some cunningly engineered PFI contracts, the health service in England will end up paying £65bn to private contractors for hospital building.

This figure is shocking, given that the actual value on completion of the 103 hospitals was just £11.3bn. This means that, in effect, private companies are charging the state a premium of more than £50bn for building and mainaining these hospitals.

Those versed in the skulduggery of PFI — whereby a private company builds public infrastructure and then leases it back to the state — will cast a weary eye over these figures. As George Monbiot pointed out over a year ago, the way the contracts are put together is unnecessarily complicated, and primarily aimed at keeping these liabilities off the state’s balance sheet (though this no longer holds).

As Monbiot notes, the “public-sector comparator” used to assess the relative cost of public and private finance for these projects was deeply flawed. This is particularly galling, as the one of the main arguments in favour of using PFI was that it was more efficient than the public sector.

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These huge NHS bills for patient care could have dire consequences for patient care. As the British Medical Association notes:

The inflexibility of PFI contracts means that it is more likely that hospitals will make cuts to services to meet their PFI repayments.

The whole sorry saga ought to make us look with trepidation on the government’s cheerleading for the role of the private sector in a revamped NHS. It is yet more evidence of the reduced accountability that goes hand in hand with greater private-sector involvement — a gap that David Cameron’s “big society” is yet to address.