Thursday, November 26, 2015

Brown's Poison Pills part 6: PFI Hospitals

I'm all in favour of making intelligent use of the private sector to help deliver public services. But you have to do it properly and make sure you get value for money.

In my experience, private delivery of public services can work very well if the relevant public authority has a strong "client" organisation to ensure that the wishes and needs of the public are taken into account in negotiating contracts, that the public do get value for money, and that the supplier actually delivers what has been promised.

Without that strong client organisation the potential benefits usually fail to materialise and the public can sometimes be very badly ripped off.

I cannot think of a better example than the way the "Public Finance Initiative" was extended by Blair and Brown, and particularly the 73 PFI hospital building schemes approved under Labour's 1997 legislation, of which the first was the Cumberland Infirmary at Carlisle.

There's not necessarily anything wrong with the idea of using private money to improve public services, but the execution has been absolutely lamentable.

It has been suggested that the PFI scheme can cost the taxpayer £300 to change a lightbulb or install a plus socket, and the ratio of money eventually charged to the taxpayer per pound actually spent building hospitals can be as bad as 12 to 1.

The Guardian found in July that 717 PFI contracts currently under way across the UK are funding new schools, hospitals and other public facilities with a total capital value of £54.7bn, but the overall ultimate cost will reach £301bn by the time they have been paid off over the coming decades.

The really annoying thing is that if this scheme had been used properly it could have meant a better deal for the taxpayer. But they didn't put that strong client side in place, didn't have the right penalty clauses, and consequently the taxpayer has had a dreadful deal.

Thanks to the incompetence of Blair and Brown PFI has meant lots of building projects which looked great while they were in power - and massive bills to pay after they had left office.

The Labour party makes out that "austerity" is happening because the Conservatives like cutting things. Actually, the gross incompetence with which Labour managed PFI is yet another reason why cuts would be happening now whoever had won the 2010 and 2015 elections because of bad decisions taken by the last Labour government. And again, it will take years to pay off.

Further reading: 

Channel 4 factcheck, "No value for money."

Daily Telegraph: "PFI hospitals are costing the NHS £2 billion a year."

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