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From The Socialist newspaper, 14 March 2003

PFI Doesn't Work

PRIVATISATION IS always a great thing - for the rich... But what about Public-private Finance Initiatives, which are supposed to provide private funding to expand and improve the education and health services, run by new Trusts? BRENT KENNEDY exposes the real story behind PFI and the Cumberland Infirmary.

THREE YEARS ago, Tony Blair opened the brand new flagship Cumberland Infirmary, which soon merged with Whitehaven to form the first Trust hospital.

Recently an inspectors' report issued a damning catalogue of mismanagement, lack of leadership, direction and planning from the overpaid directors and chaos, which endangers the health of patients.

The 87 million new hospital actually has a smaller capacity than the Victorian building it replaced. The enormous entrance hall-cum-central-aisle is a cross between a shopping mall and a cathedral, but the wards are only big enough for five beds, so the patients have no privacy and the staff can't care for them properly.


The inspectors saw patients' showers being used as storage rooms, the wards and corridors full of clutter, including in front of fire exits and the corridors are too narrow to support patients unsteady on their feet from both sides. A friend of mine saw soiled bedding left lying under the beds because of lack of storage space.

These are not cosmetic problems, they have consequences. Several wards had to close some weeks ago due to the so-called 'winter bug' causing vomiting and diarrhoea. What prevents this occurring? Soap. Who saves time and money on soap? The private cleaning contractors.

Whole wards had to be closed and thoroughly scrubbed down and the patients sent packing. Other patients had already been relegated to the newest 'wards' - portable cabins in the car-park. All this led of course to the cancellation of operations, so private enterprise in action has prevented the hospital reaching government targets.

A year ago my mother lay in this hospital, unable to move, following a severe stroke. With the nurses run off their feet, cramped conditions and patients lying waiting for their soiled beds to be changed, I went there every day and took over feeding her back to health.

No Extra Staff

Without this 'extra staff' I don't think she would have recovered her speech and ability to move so successfully. Mind you, as to whether the food - imported by some private contractor from miles away and warmed up again - had any nutritional value, I remain sceptical. Fighting privatisation and public spending cuts isn't just an ideological question, at times it's a matter of life or death.

To be fair though, it does get worse. The report by the Commission for Health Improvement (CHI) reveals that some patients have not even been seen more than two weeks after being told they have cancer. Others have had to wait for 15 months for an MRI scan. More still have simply had to go to Newcastle. The report talks of: "the impact this may have on patients in terms of outcome and quality of life", if you see what they mean.

All about money

What makes this report so politically damaging for New Labour is the point-blank condemnation of the Trust directors, who "have a low profile" (which means they don't actually do anything) and "do not instil confidence that patient care is of primary concern." In other words, its all about money. 75,000 for a start - that was the annual salary of the Chief Executive until he did a bunk just before publication.

But the main target of criticism hasn't resigned yet: Trust chair Barbara Cannon. The estimation of the watchdog's report, which raises "serious concerns around this trust's ability to overcome problems" seemed to be only confirmed by Cannon's own view of the whole sorry mess: "There is no cause for alarm" !

There was one very positive aspect of the CHI report, however. Not only does it exempt the health staff from criticism, praising the commitment of nurses and doctors, but also draws attention to areas of good practise introduced by staff themselves.

Nurses and assistants have taken initiatives themselves to increase efficiency, leading to speedier treatment, shorter stays and preventing deaths from pneumonia among elderly patients. Now if only these, the real experts, were allowed to democratically and collectively manage the hospitals, we'd all feel safer.

The Financial Maze

THE REAL scandal behind this chaotic situation is the financial basis of PFI, which doomed the hospital from the start and makes it impossible to manage the hospital efficiently and meet targets, irrespective of which individuals occupy the top jobs. This goes to the root of PFI as such.

The input of 'private' investment came from a firm called Health Management (HM), a merger of Amec and Building and Property, a formerly public-owned maintenance unit, which was privatised.

Where did HM get the capital to build the new hospital? It simply borrowed it on the bond market. This is what the state does anyway, the only novelty being the 11% interest payable instead of around 6%!

Everyone thinks the new hospital cost 87 million to build. In fact it cost 67 million. HM borrowed the higher figure and immediately paid a 20 million bonus to the bondholders, in other words, themselves.

So instead of waiting years for their repayments they got more than a quarter back immediately. And although the hospital wasn't opened until 2000, payments to HM for a not yet-available building began two years earlier.

We taxpayers started paying HM an annual fee for the use of their hospital of 10.98 million but because this was index-linked to inflation it is currently 14 million a year. New Labour's justification of PFI is this: "get private capital to build us a hospital or whatever right now, and we'll pay it off later".

But the deal is: we have to pay HM a high, cumulative compound rate of interest index-linked to inflation for 35 years. Assuming inflation averages only 3% over these decades - and that is being very conservative - we will end up paying 1,118 million for a 67 million building.

Local UNISON official Peter Doyle has raised this scandal with the public auditors but in a clear political decision, has been overruled.

But that isn't all - after all these payments we still won't own the hospital, HM will! That's called eating your cake and having it. Meanwhile, it would make sense to renovate at least a part of the old hospital building, standing empty next door, to correct the 92-bed shortfall. But for that we would have to ask the permission of and pay more money to HM, because as part of the deal this prime-site building near the centre of Carlisle was given to them for the next 999 years.

A major source of problems in the North Cumbria Trust was the impractical merger of two hospitals 40 miles apart in Carlisle and Whitehaven.

This was forced artificially a year after the Cumberland Infirmary was opened because the burden of 10.9 million repayments - a fifth of the annual budget - was impossibly high. By merging it with another hospital and its budget, the burden was 'reduced' to about 11%.

For the same reason Britain's second PFI hospital, in Bishop Auckland, was merged with Durham within a month of opening. PFI is clearly too big a burden for one hospital to bear.

One chief executive after another has been forced to quit and now the pressure is on the Trust chair, Labour councillor and would-be MP Barbara Cannon, to go. She is supported by the New Labour mafia as a political appointee whose role is to defend the indefensible - PFI.

HM should be retaken into public ownership - without a penny compensation.

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In The Socialist 14 March 2003:

Organise To Walk Out Against War

Support the firefighters

PFI Doesn't Work

Stop Work To Stop The War

Blair's war crisis

School And College Students Show The Way

10,000 rally in Stockholm

World economy: Is War Good For Business?

Asylum - What We Say


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