CHAPTER THREE

Socialist response to the Hayes Report: Chapter Three

 

PRIVATISATION BY STEALTH

 

Introduction

 

As the number of NHS beds has declined in recent decades, the number of private beds has expanded dramatically.  Clearly something doesn't add up.

 

Over one hundred thousand NHS long-stay beds of various types have closed since 1979, whilst the number of private long-stay beds rose from 33,000 in 1979 to 385,000 in 1998.  The new beds make a profit whilst the old ones didn't.  The only place that profit can come from is through altering the terms and conditions of staff.  Billions in public money has been paid to the owners of nursing and residential homes who profit from low wages (the fees of most residents are paid by the state).  The market is increasingly dominated by large firms with annual profit rates of up to 20%.  The industry is now whinging about their margins being squeezed, largely because of the introduction of the minimum wage, but it ought to be remembered that the huge resources they own have almost entirely been paid for by us, the public.

 

As the number of acute NHS beds has dwindled the private sector has also expanded its role in the acute field.  The numbers of both private acute hospitals and private acute beds has increased.  The private sector is now rubbing its hands in glee in anticipation of a further expansion as New Labour presses ahead with its plan to utilise private hospitals to carry out hundreds of thousands of NHS operations a year.

 

The number of pay beds (private beds) in NHS hospitals has also increased over the last two decades, though to what extent it is difficult to gauge as Trusts have not had to return figures in this area since 1991.  This is somewhat ironic given the obsessive demands to collate figures for all sorts of "performance indicators".  In fact the government conveniently can no longer tell us how many hospitals or A&E departments there are in the NHS! They collect the information that suits their requirements, and nothing else.

 

Table 5 outlines the position in 1995.  The number of private institutions rose by 281% in the decade to 1995, the number of acute private hospitals by 23%, the number of acute private beds by 13% and the number of nursing home beds by a massive 430%.  

 

Table 5            Changes in private sector provision in England

                        Institutions                 Acute              Acute              Nursing Home

                                                            hospitals         beds                beds

1984                1491                            200                  10067              32831

1994/95            5676                            245                  11363              173961

% change         281                                23                        13                   430

 

These changes have impacted on Northern Ireland as everywhere else.  Every sizeable town and village has one or more nursing homes.  Larger operators such as Crestacare employ over 2000 staff in more than 40 homes across the North.  Northern Ireland also has two private hospitals  - one in Limavady and one on the Malone Road in Belfast.  (And surely if we are to debate the future of acute facilities these too should be thrown into the melting pot?  And maybe they should close before the Tyrone County or Downpatrick?) 

 

When all private (acute plus nursing home) beds are totalled up and added to the numbers of NHS beds it can be argued that the total bed supply has actually increased since the early 1980s.   Beds are not in reality being closed, they are being privatised.

 

For every five long-stay NHS beds that have gone, six private nursing home beds have appeared.  Long stay psychiatric patients, patients with learning disabilities, and the ill elderly have moved out of large state institutions and into smaller (but not small in the sense of a family home) private institutions.  There is also a strong association between the number of acute beds closed and the number of private nursing home beds opened (five beds in nursing homes opened for every acute bed closed). 

 

The New Labour government has announced plans to open new “intermediate” beds, to take pressure off the acute sector.  These beds will be in a private version of the old convalescent beds once widely available in the NHS.  These beds, mostly in separate small hospitals scattered throughout Northern Ireland, meant that “bed-blocking” was rare.  The convalescent hospitals were all closed in the 1970s and 1980s.

 

One group of health economists (Hensher and colleagues) have argued that "activity data on the private nursing home sector are not readily available, so it cannot be shown whether the workload in hospital can be directly substituted by the workload in a nursing home.  However, the relation between bed numbers alone seems strong enough to suggest that nursing homes may be a very close substitute for hospital care" (BMJ 1999 319:1127-1130).

 

The Private Finance Initiative

 

The Private Finance Initiative (PFI) is a method of obtaining financing for building projects.  The Tories introduced it in the 1990s in an attempt to keep "public" borrowing to a minimum a standing aim of monetarists.  Doing so also kept their mates in big business happy as PFI schemes are very profitable indeed.  Many people believe that the PFI is a source of finance that would not be available in any other way and that the private sector is being in some way generous, helping the NHS out of a hole.  The truth is very different.  There are alternative ways of obtaining finance for new hospitals.  Traditional methods of financing are much cheaper, though ultimately the question must be asked, why should there be any profit in the building of hospitals?

 

If government finances are in good shape, new hospitals can be paid for directly out of accumulated tax receipts, with no need for borrowing.  Public borrowing is much cheaper than PFI, though it too involves profits for the banks.  The government pays for new projects by borrowing from the banks at commercial interest rates (currently very low) and then repaying the loans through taxation income.  Under the PFI hospitals are built by the private sector and then leased back to the NHS over 20, 25, 30 or even 60 years.  Paying the debt is deferred - it is paid from annual income (or the revenue budget) each year.  We all know that this is more expensive in the long run - who buys on credit if they are in a position to buy outright?  Who chooses the most expensive interest rate, rather than the cheapest, when they are buying a new fridge, or car?  

 

The workings of the PFI are difficult to understand and transparency is further undermined by the use of “commercial confidentiality” to hide what is really going on.  But understand we must, if we are to prevent it destroying our NHS.

 

The PFI was slow to get under way but since New Labour came to power it has begun to grow exponentially.  Since 1997 six hospitals have been completed, work has started on a further 21, and 42 schemes, worth  £5.4 billion, are under negotiation.  Only four of these schemes are publicly funded, the rest are funded under the PFI.  According to the health secretary, Alan Milburn its “PFI or bust”.  There is no real competition between the private and the public sector – the private is favoured at every stage of the process.

 

The Hayes Report is clearly in favour of the PFI approach arguing that “Consideration should also be given to the scope for greater use of private finance, although recognising of course that this will have implications for the revenue budget”.  Hayes commends the findings of a similar review in Wales, and proposes that each of the three new health systems in the North “should” produce an integrated business case for the complete redevelopment of the acute services network in its area.  This should then form “the basis of a PFI scheme”. 

 

It continues:  “The Welsh Review identifies a number of benefits from approaching PFI in this way:  It creates PFI schemes of a size and nature more likely to be attractive to the private sector.  It provides capital funding at the front end of the planning period, enabling the modernisation agenda to be taken forward quickly and providing the stimulus for changes in clinical practice.  It focuses the PFI process into a more concentrated period of time, enabling management to develop and maintain the skills needs to work successfully in the PFI environment”.

 

PFI schemes create vast profits and thus always result in fewer beds (in Dudley, for example, 70 fewer), and in job cuts (190 in Dudley, where the staff fought long and hard to resist).  To take a second example, the University of North Durham Hospital, built at a cost of £76 million, opened in April 2001 with 454 beds.  The hospital it replaced, Dryburn, had 605 beds.  Within weeks of opening management were forced to admit that the hospital was 54 beds short (Guardian, July 12 2001). 

 

In Kidderminster in England the local hospital was closed as a result of the need to make a nearby new PFI hospital more profitable.  Hayes is proposing something very similar here.  The overall package has been put together with the concept of "PFI ability", or profitability, in mind.  Hospitals will have to close in order to make PFI schemes in Northern Ireland more attractive to the private sector.

 

An Historic lack of Investment

 

Why is the hospital system in the North in such poor shape and why are we being told that the PFI is the solution?

 

The creation of the NHS in 1948 effectively nationalised (or brought into public ownership) the existing hospitals, some previously run by local authorities and some of which relied upon voluntary contributions.  The new service inherited a crumbling Victorian infrastructure, in need of huge investment to bring it up to standard.

Between 1948 and 1962 there was almost no investment in new hospital buildings (the only new major hospital built anywhere in the NHS in that period was in fact Altnagelvin in Derry).  Enoch Powell’s ambitious 1962 Hospital Plan was supposed to change everything, rebuilding the NHS from the ground up.  In fact only one third of the proposed 224 schemes were ever completed.  A further third were commenced but not completed and one third never got off the starting blocks. 

 

Any possibility of the Hospital Plan being realised came to an end with the 1974-75 economic crisis.  Since then investment in new hospitals has been neglected by government after government. Only seven public schemes worth more than  £25 million were completed between 1980 and 1997.  As a result NHS staff struggle on in outdated and worn out facilities.  By 1999 the NHS maintenance backlog was calculated to stand at £2.6 billion.

 

There has been no reversal of the historic decline in public investment, despite Tony Blair’s boast that his PFI plans comprise "the largest hospital building programme in the history of the NHS".  In fact, as critics have argued, the new hospitals "will be funded through extensive hospital closures and resources generated by NHS trusts, not by new government funds" and "the NHS must generate efficiency savings to fund new investment" (BMJ 1999;319:48-51). 

 

In fact in the period 1997/1999 there was negative government investment in new hospitals – the costs of all new developments were more than met by hospital closures, the sale of land owned by the NHS and capital charges (which we will go on to explain).  Of the £8 billion spent in 1999-2002 all but £1.5 billion came from closures, land sales and capital charges.

 

Capital Charging

 

As a prelude to the PFI a system of “ capital charging” was first introduced .  Since 1991 Trusts have been charged, or taxed, 6% of the value of their current assets by the government.   The charge comes out of their day-to-day finance.  The introduction of this charge had a dramatic effect on the prospects for developing new hospitals.  To take one example, before 1990 there was a plan to build a new 900 bed hospital, which alongside the existing hospitals, would provide a total of 1600 beds for Norfolk and Norwich.  The plans changed when capital charging was introduced. 

 

The original plan would have cost too much annually in capital charges and was replaced by a revised plan for 1000 beds in one hospital only.  The new system of capital charging had cost 600 beds.  Thus capital charging, introduced to facilitate the later introduction of PFI, had a negative effect from the start.

 

The idea behind capital charging was to introduce the values of market into the NHS.  Instead of merely maintaining their buildings Trusts would pay the government a levy for their use despite the fact that these facilities are already owned by us, the public.  It is then a small step to paying the private sector for the use of new buildings.  In addition the introduction of capital charges introduced a revenue stream from within the NHS budget that could then be used to pay for PFI projects.

 

Capital charging contributed greatly to the huge financial pressures which Trusts found themselves facing by the late 1990s.  Capital charges diverted hospital operating funds to pay for buildings and equipment that were already owned.  The greater a Trust’s assets (the more hospital sites and buildings it has) the greater the proportion of income it is necessary to set aside for capital charges.  The result was pressure to sell “surplus” land and to close smaller units through mergers.  In the same period miserly increases in NHS funding, which were not sufficient to cover wage increases or NHS inflation (higher than general inflation), and demands for 3% annual “efficiency savings”, brought the service to its knees.

 

Smoke and Mirrors

 

Trusts can pay for PFI projects by using finance previously used to pay capital charges, by selling land or buildings, by cutting costs or by income generation (PFI schemes often have increased numbers of private beds and include shops and cafes).  Even with these measures many PFI schemes are still unaffordable and the government have been forced to step in with external subsidies (the "smoothing mechanism"), have stolen funds intended for publicly built facilities elsewhere in the NHS, and have waived any cut from the proceeds of asset sales.  As a result of these measures PFI facilities draw funds from the NHS at the expense of publicly owned facilities.

 

Smoke and mirrors are used to make PFI schemes seem better value for money than they are.  All such schemes are compared with a notional publicly-funded equivalent, the so called public sector comparator.  The comparison process uses two techniques, "discounting" and "risk transfer".  Both techniques are dubious.

 

"Discounting" assumes that government borrowing would attract interest rates of 6%, when a lower rate is much more probable.  The 6% rate was chosen for entirely political reasons.  According to the Treasury's own guidance, "the practical choice of 6%, from the top the range .... is an operational judgement, reflecting, for example, concern to ensure that there is no inefficient bias against private sector supply".  The 6 % rate favours private capital.  It was adopted to "prove" what is untrue.

 

Despite the adoption of the 6% rate the public sector comparator usually comes out better than the PFI scheme.  The "risk transfer" calculation was introduced to take care of this – a calculation which supposedly rewards the private sector for taking on “risk” previously carried by the public sector.  Again the calculation is suspect.  Firstly the 6% interest rate actually takes "risk" into consideration and a proportion of risk is thus counted twice.  And secondly, private companies are in effect handed millions for supposedly taking on risk (for example, that necessary savings in clinical care will not be forthcoming) when most elements of risk are in fact retained by the Trust.

 

The bidding process is also heavily weighted in favour of the private sector.  At an early stage of the PFI process a “preferred bidder” is selected.  The “preferred bidder” wins the contract with a flimsy outline plan and then goes on to develop its full plan, ratcheting up costs all the way.  The company suddenly discovers costs it hadn’t spotted before, exaggerates its financial risks and labour costs and slips all sort of “financial adjustments” into complicated spreadsheets.  The process is so weighted in favour of the “preferred bidder” that no-one ever calls halt at this point.  The price of the project can thus rise two or three times between the selection of the “preferred bidder” and the signing of the final contracts.  

 

Planning or Profits?

 

The PFI is very attractive to the private sector because of very high rates of return on investment.  "Total costs (construction costs plus financing costs) in a sample of hospitals built under the PFI are 18-60% higher than construction costs alone.  Shareholders in PFI schemes can expect real returns of 15-25% a year.  The consortiums involved in these schemes charge the NHS fees equivalent to 11.2-18.5% of construction costs.  If the Treasury were to finance new hospitals directly out of its own borrowing it would pay a real rate of annual interest of 3.0 -3.5%” (BMJ 1999;319:116-119).  The £2.7 billion Scottish PFI programme will cost, at a conservative estimate, "£2 billion more than if the Treasury had acquired the assets directly".  The higher costs “will be met locally through cuts in clinical spending and nationally through subsidies from NHS capital budgets” (BMJ 1999;319:116-119).

 

On average PFI schemes reduce the number of available acute beds by 31%.  The government lie, and the lie of managers, is that bed numbers are decided by doctors.  The Scottish health minister told the Glasgow Herald "it is the clinicians who decide on the number of beds" when cuts at the new Royal Infirmary of Edinburgh were criticised.  One of the "responsible" clinicians retorted in the same paper:  "We were told the maximum costs and told how this translated into maximum bed numbers".

 

Prior to 1990 planning of new services was based, at least in theory, on estimates of need. Now the "NHS Capital Investment Manual" describes affordability and value for money as the key criteria in planning.

 

Projections of " demand" have replaced estimates of need in the planning process.  Measures of "efficiency", such as throughput, bed occupancy and length of stay have become the gold standard.  Performance targets are set at unfeasibly high levels to make projected bed numbers appear sufficient.  Even to make this equation work "serious departures from the Department of Health's definition of admissions, bed numbers and performance measures" are required.  "These departures from normal planning methods suggest that the main function of the current planning process is to justify cost restructuring: projected clinical activity has to be brought into line with the income and hospital capacity that will be available to cater for it” (BMJ 1999;319:179-184).

 

Why is the PFI so profitable?

 

To summarise, a number of methods are used to ensure that PFI schemes super profitable.

 

1.   Shifting costs of care out of the NHS.  As already outlined this has already occurred on a large scale in the NHS, especially in dentistry, optical services and long term care.  Between 1986-87 and 1996-97 the number of NHS geriatric beds fell by 42%, the number of mental illness beds by 47% and the number of learning disability beds by 74%.  The costs were transferred to users, carers and local authorities and new profits were generated for the private sector who now provide the bulk of long-term care.  Most people in England no longer have access to NHS dentistry as dentists refuse to take on NHS patients and few are now entitled to free optical care.  And of course prescription charges have risen by 600% over the last two decades. 

 

In the planning of NHS PFI hospitals the idea is to shift care costs by reducing the number of "inappropriate" admissions (as already noted, there are fewer of these than is often argued) and by avoiding "delayed" discharges (that is, getting people out of hospital as quickly as possible) so that the cost of caring for patients is borne by someone else.   There is a problem with this approach, however, as delayed discharges result from poor community support.  PFI schemes do not provide for improved support and often result in reduced community funding, as available finance is diverted to the private sector.

 

2.            Increasing income generation and increasing numbers of private patients.  Income may be generated by charges for car-parking and by leasing space in new hospitals to shops and restaurants.  Increased income from private patients is also an integral component of many PFI schemes.  According to the Norfolk and Norwich plans, for example, "East Anglia has a very high incidence of private medical insurance (21.3% compared to the national average of 13%).  There are clearly opportunities for the trust to expand its income from private patients.  The trust already provides 18 private beds and generates £1.65 million in annual income".  Norfolk and Norwich, like many other Trusts planning PFI projects, aim to increase the number of private beds in their hospitals.  In the past the NHS was in a position to convert private beds back to public use if the need arose.  Under PFI this may not be possible.

 

3.            Increasing clinical productivity.  All PFI plans assume huge and unlikely increases in             throughput.  In the words of one commentator their plans "presuppose truly heroic levels of staff productivity" and "in effect, the hospital becomes a factory for conveyor belt care" (BMJ 1999;319:179-184).

 

4.            Reducing the cost of the workforce.  This is the most common way of reducing costs. The PFI plan in Edinburgh projects 18% fewer clinical staff, North Durham 14% fewer nursing staff.  Staff costs (i.e. pay) are projected to fall even further: 17% in the former case, 22% in the latter.  The proportion of unskilled nursing staff will rise from 25% to 37% in North Durham and from 21% to 30% in Edinburgh.  These cuts are a direct result of increases in capital costs (that is, profits for the private companies involved), rising as a proportion of total income from 8% to 18% in Edinburgh and from 7% to 14% in North Durham. 

 

Health is a labour intensive industry.  Labour costs consume 62% of resources in acute NHS hospitals but less than 40% in acute private hospitals.   Long-stay NHS hospitals spend 66% of their income on staff.  The top ten private sector providers of long term care have screwed this down to only 55%.  In 1999 the average annual wage for NHS community care staff was £20,000 and for NHS mental health staff it was £21,000.  In private sector nursing homes wages were a pitiful £8,000 a year on average.  This explains why the private sector companies made operating profits as high as 28% of income in 1997.  The largest nursing home company, Ashbourn/Sun, with 8343 beds, paid its employees an average of £6900 in 1997 and made an operating profit of £228 million.

 

Under the PFI support staff will find their wages cut and ultimately this may apply to all staff. Such measures do not of course apply the bosses.  The directors of the 15 top PFI companies awarded themselves average pay rises of 32% in 2001.

 

According to one of the parasitic consultancy companies that now hovers around the NHS "each million pounds of incremental PFI capital cost anything from £100,000 to £179,000 a year, requiring the elimination of four to five jobs to pay for it.  An incremental investment of £200 million requires 1000 job losses, which might be significantly greater than 25% of the work force and is probably only achievable by reducing the number of doctors and nurses, although often these job losses will not be realised within the hospital undertaking the development, but in the local healthcare market" (Newchurch and Company, 1998).

 

5.         Re-financing Deals.  In a further twist in the PFI tale the private sector consortia involved are lining their pockets even further through "re-financing" deals.  Re-financing allows developers to renegotiate the loans they have taken out to build a hospital at a later date (usually when the project is completed and supposed "risks" are past - risks that were often overstated in any case).  Cheaper loans mean higher returns for shareholders.

 

The developers who are building the £230 million Norfolk and Norwich Hospital are hoping to coin an extra £70 million through re-financing.  The developers of the new Dartford and Gravesham Hospital in Kent (Carillian, United Medical Enterprises and Innisfree, a specialist PFI investment fund) are seeking to make £30 million through refinancing their £133 million project.  The chief executive of Innisfree, David Metter, argues that "re-financing is a way of taking profits along the course of a project.  It is a reward for the risks that are taken".

 

It is estimated that the private sector will eventually earn £30 billion a year through the PFI.  The first £14 billion of PFI deals already agreed will net the private sector £96 billion over the next 26 years.  According to one informed commentator:  " De facto the giant corporations that carry out these contracts will come to control public expenditure and public policy" (Professor Allyson Pollock, Observer 8th July 2001).

 

International Privatisation

 

Big business is itching to get in on the PFI act.  A new type of corporation almost entirely dependent on government contracts has developed in recent years.  Banks are prominent players -  Norwich Union, for example, is building GP facilities in Bradford.  The US health care business is also keen to get its fingers in the pie.  This sector is so profitable that the firms involved are known as "the darlings of Wall Street".  During the 1990s huge health maintenance organisations, which provide a full range of services, came to dominate the US market and it is US foreign policy to export this approach.  The PFI is their way in to the NHS.  A subsidiary of Columbia HCA, the largest health maintenance organisation in the US, has already formed an alliance with Private Patient Plan (PPP), the largest private health insurer in Britain and is jostling for position.

 

New Labour's bowing down to big business has no bounds.  A desire to promote the private sector in health is prominent in the 1999 Health Act and became more strident after the 2001 election.  In 1998 the then Health Minister Paul Boateng declared that "if a local authority seeks persistently to undermine the private sector, the local authority will answer for it".  In his words “the days when a local authority could get away with an approach to residential care which was always to prefer their own provision before that of the private sector are dead and gone and will not be tolerated”.

 

The PFI and Public Private Partnerships (as used in the London Underground) are central to New Labours' strategy (PFI is a type of Public Private Partnership).  New Labour is implementing the PFI not just in the field of health but also in every area of government.  Between 1998-99 and 2001-2  £2.35 billion was invested in health through PFI schemes, £3.65 billion by the departments of transport, environment and the regions, £1.08 billion in defence, and £13.1 billion in total in the public sector.  Accounting firms KPMG and PWC have launched a joint document with the Treasury - "Public Private Partnerships, UK Expertise for International Markets" - the aim of which is the development of "commercial opportunities" for British companies internationally.

 

Similar approaches are being pushed across Europe and further afield.  The European Union is at the forefront of these developments and have openly declared that the widespread implementation of PPPs will help them meet the goals of reducing public expenditure and of creating fresh opportunities for private industry.  (See "Making the Most of Opening of Public Procurement", published by the European Commission in 1997).

 

A whole raft of large companies, including Amee, Balfour Beatty, Amey, Serco, Mowlem, WS Atkins and Jarvis, are involved in the PFI scene.  Mowlem , a building and services firm, saw its pre-tax profits rise by 20% to £30.3 million in the 12 months to December 2001 and its turnover rise from £1.4 billion  to £1.7 billion.  Its dividend to shareholders was increased by 10%.

 

A prominent "think - tank", the Institute of Public Policy Research (IPPR), is busily nurturing PPPs and the PFI.   It meets in secret and pretends to be apolitical.  In fact it is tied hand and foot to big business and the Treasury.  Those who sit on its commissions have a vested interest in its conclusion that "the operations element of a PFI hospital should not be limited to the provision of  ancillary services" but should also include the whole range of clinical services.  Obviously the more services that are handed over to the private sector, the greater the profits. 

 

Under union pressure, Blair has conceded that staff will not always be handed over to the private sector but neither has he excluded it as a possibility.  Unfortunately, the key health union UNISON is focusing almost solely on protecting staff in this way, rather than resolutely opposing PFI in principle.

 

The global financial institutions that have become the target of anti-globalisation protesters in recent are busy promoting public - private partnerships across the world.  There are various types of PPP, including what are known as design, build, finance and operate (DBFO), build, own, operate and transfer (BOOT), and build, operate and transfer (BOT) schemes.

 

When the International Monetary Fund (IMF) and the World Bank enforce their economic dictates on developing countries they insist that the PPP approach is adopted.  Indeed acceptance of this approach is a precondition for further loans.  As a result of this imposition massive cuts in existing public sectors are carried through.  This means that schools and hospitals in developing countries are now in a worse condition than they were in the 1960s.

 

In 1996 the World Trade Organisation (WTO) implemented the "government procurement agreement" which opened up public contracts to international competition and the WTO, IMF and the World Bank all seek to promote "markets in infrastructure provision".  The European commission has used grants to stimulate the development of PPPs.  The PPP market was worth 720 billion ECUS or 11.5% of the gross national product of the 15 member states of the European Union in 1994, and it has grown since.     

 

The European Investment Bank admits that the PPP approach is more expensive than traditional methods of financing, but justifies its adoption by the claim that the private sector is less "risk averse" (that is, prepared to take risks in a spirit of entrepreneurship) and hence more efficient.  The real world evidence is that the private sector is very averse to risk indeed.  They want to have their cake and eat it.  When schemes to provide new computing systems for the National Insurance Agency and Passport Agency went belly-up the government carried the can, refusing to fire the companies involved even though they were entitled to. 

 

All across Europe smaller hospitals are closing.  The drive towards greater European unity is leading to cuts in social spending as the various governments attempt to keep within the financial boundaries dictated by the Maastricht Treaty.  The Treaty dictates "greater public sector restraint and budgetary discipline, emphasising the need for increased efficiency in spending on economic and social infrastructure".  And of course PPPs and the PFI keep down government borrowing, in a totally artificial way.

 

The First PFI Hospital

 

The first PFI hospital to be completed in England was opened by Tony Blair to great fanfare in June 1999.  It has been a complete disaster.  According to The Observer (8th July 2001) "PFI has meant cardiac patients drenched with water flooding from broken pipes, sewage spilling out into the operating theatre, nurses left ventilating patients by hand as operations are plunged into darkness, broken equipment, second-rate maintenance as engineers are made redundant, flea-infested laundry, dirty wards because of cutbacks in cleaners, patients put in chairs because of the reduced number of beds, and dying patients remaining undiagnosed as waiting times doubled".

 

The hospital has no air-conditioning and during hot weather temperatures soar to 1000 F.  Hot weather expands the water pipes, which are joined together by cheap plastic sleeves rather than being soldered, leading to leaks.  Cheap plastic joints have also lead to ceiling collapses.  The emergency generator has failed on a number of occasions plunging the hospital into darkness and causing life support equipment to fail.  Equipment breaks down because it is cheap and then cannot be easily fixed because the engineer has been made redundant.  As a result operations have been cancelled. 

 

The bed manager has been told to put patients into chairs for a few hours to allow other patients to use their beds.  The wards are so small that doors banged into beds and had to be removed.  Resuscitation trolleys were too big to get through the doors and had to be redesigned at a cost of £18,000.  The ward walls are so thin that they cannot support shelves.  Despite these problems the health authority pays £11 million a year for the hospital to a consortium run by the construction group AMEC.  AMECs' shares are soaring as investors greedily eye its profit margins. 

 

Some of the private contractors involved have spent a tidy sum on actually sacking staff.  Building and Property Group (part of the Interserve group) run the ancillary services.  They abandoned the existing family-friendly shift patterns (which allowed cleaners to pick up and leave off their children at school) and as a result more than 30 were forced to leave their jobs.  The GMB union took the contractors to an industrial tribunal.  The Building and Property Group backed down, paid £600 to each of 60 cleaners and reintroduced some family-friendly policies.  The Group has spent £1.1 million in total on making people redundant and has actually produced a surreal document entitled "Redundancy Programme - Potential Upside".  In October 2002 the Cumberland was found to have routinely discriminated against women by a further industrial tribunal and 1400 nurses, cooks and cleaners won £97 million in back pay. 

 

The chairman of the hospital medical staff committee has issued a stark warning to everyone in the health service. "The developers always think of the bottom line.  You have to hold a gun to their head to get them to repair anything.  If this is what Blair has in mind for the NHS, watch out".

 

The Cumberland unit the only disaster imposed on the NHS through the PFI.  In Halifax, the PFI Calderdale Royal Hospital is known to its staff as Fawlty Towers.  Power breakdowns have cut off life support machines and the hospital has been plagued by mice!  Waiting lists have grown fourfold despite hundreds of patients being sent to a nearby private BUPA hospital. A £67 million PFI hospital opened in Bishop Auckland, next door to both Tony Blair’s Sedgefield constituency and Alan Milburn’s Darlington constituency on April 1st 2002.  Already it is being described as a white elephant.  The nearby £97 million PFI hospital of North Durham is short of beds and its waiting lists are lengthening.  As a result, £120,000 was squandered within its first ten months of operation paying NHS consultants extra to treat NHS patients in private hospitals. 

 

Conclusion

 

The Private Finance Initiative has the potential to decimate the NHS.  It is ludicrously expensive and it leads directly to bed cuts and job losses.  It is not an answer to the problems facing the NHS and it is not an answer to the problems facing NI’s health service in particular.  We cannot mortgage our future in this way.  Once a PFI scheme has been launched, it has its own momentum and cannot easily be undone.  The PFI must be stopped in its tracks before it does any further damage.

 

Again, it is important to emphasise, the government is providing little new net capital.  New buildings are increasingly paid for out of the day-to-day hospital budget.  "Under the private finance initiative the NHS pays more for less; paradoxically, the "largest hospital building programme in the history of the NHS" is being funded by the largest acute hospital closure programme" (BMJ 1999;319:48-51).

 

The PFI has the potential to impoverish the NHS, to dismantle the NHS and to privatise large chunks of the NHS.  The conclusion of one group of critics is stark: "The PFI provides the conditions and the mechanisms for reversing the principles that health care should be funded out of general taxation, that public services should remain in public ownership, and that health services should be free at the point of delivery.  The NHS has already undergone major redefinition with the redrawing of boundaries of responsibility for long term care, NHS dentistry, optical services, and routine elective care.  The PFI continues this trend across the NHS and all public services.  It is being implemented with virtually no public debate" (BMJ 1999;319:249-253).

 

Chapter 4