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From The Socialist newspaper, 11 July 2012

Fight Profit From Illness

Nationalise PFI schemes without any compensation

South London Healthcare Trust has effectively gone bankrupt. That news will not surprise health workers and socialists who follow the nightmare of PFI (Private Finance Initiative).

The PFI scheme threatens vital services and NHS jobs across the country, reports Andy Ford, an NHS rep for the Unite union.

South London Healthcare was formed by merging three hospitals - Queen Mary's, Sidcup; Queen Elizabeth, Woolwich; and Princess Royal in Orpington.

Two of those hospitals - Queen Elizabeth and Princess Royal had huge PFI commitments. They merged with Queen Mary's precisely to use the non-PFI hospital's budget to try and cover unsustainable PFI charges.

All three have been now dragged down by PFI's extortionate, unsustainable costs. 14% of South London's budget now goes straight to the PFI vultures, and it's losing 1 million a week.

It is a repeating pattern with PFI. Carlisle Hospital was the second ever PFI, in 1997. But as was pointed out then, this pushed capital charges up from 7% of the Trust budget to an unsustainable 15%.

Some years after opening its doors in 2000, the Carlisle Trust merged with the non-PFI hospital at Whitehaven, purely to use Whitehaven's budget to service the PFI debt.

But the new merged entity was still sinking beneath the debts and Northumbria Healthcare Foundation Trust is now poised to take it over.

But the PFI is so expensive, consuming 10% of North Cumbria's turnover, that Northumbria is investigating renationalising the PFI, using Department of Health (DoH) bail-out funds.

Northumbria said that simply bailing out the deal with the funds would not fundamentally change the position.

Only buying out or 'renationalising' the PFI deal would allow the new Trust to operate properly.

Last year consultants McKinsey named five other Trusts as needing DoH cash support to meet their PFI commitments - Barking Havering and Redbridge, Maidstone and Tunbridge Wells, St Helens and Knowsley, Dartford and Gravesham and North Cumbria.

Most of these Trusts have already been through a cycle of mergers, just like North Cumbria.

A manager suggested in the Health Service Journal (HSJ) that the logical next step would be to abolish the DoH and just have McKinsey.

There is more than a grain of truth in this: Private Eye magazine has exposed the secondments and revolving door between the Department of Health PFI unit and privatisation vultures like McKinsey, KPMG, PwC etc.

St Helens and Knowsley is in an even worse position than South London - 17% of its turnover goes to the PFI consortium.

Last September Andrew Lansley admitted that 60 hospitals were at risk of collapse due to PFI. Many other hospital Trusts are likely to end up in the DoH "unsustainable providers regime" - effective bankruptcy - like South London.

Vulture capitalists

Why is PFI so expensive? Firstly, once the "preferred bidder" is announced some privateers then double their price to the NHS.

Secondly the contacts are structured to give the PFI consortium their costs plus a guaranteed profit, and PFI charges are linked to the Retail Prices Index, often for the next 30 years.

Meanwhile the Trust's income from charges for operations and treatments (laughably called 'Payment by Results') is either linked to the lower Consumer Prices Index or actually being cut.

Thirdly and most significantly the money borrowed to build the PFI hospitals has to be borrowed on the commercial money market, so the interest charges are double what would be paid on traditional public procurement.

Combine these factors with the fact that the PFI charge is levied for the next 30 years and you get bizarre cost inflation - Norfolk and Norwich would have cost 229 million on public procurement, but will end up costing 1.16 billion over its 35 year PFI.

In a further irony, many PFI consortia were sold to venture capitalists and finance companies based in tax havens who don't even pay tax on their grotesque profits! PFI hospitals are not sustainable long term, or maybe even medium term.

What is the political response to the PFI crisis? Tory health secretary Lansley recently declared "We will not make the sick pay for Labour's debt crisis".

He has a point - far more PFIs were signed off under Tony Blair than John Major, as Labour enthusiastically embraced the market in health care.

Labour has a problem in criticising deals signed off on its watch. So ex-Labour Health Secretary Andy Burnham "did not comment" when Health Service Journal contacted him over the massively expensive PFI in Peterborough, signed off by the DoH in 2007 despite written warnings from the health regulator Monitor. Peterborough reportedly pays more than 20% of its income over to the PFI.

According to HSJ, "sources close to" NHS Chief Executive David Nicholson said that South London's treatment was intended to send a message to all the other sinking NHS Trusts that they will not be simply bailed out in future. How different to the banks!

The HSJ also speculates what the next stages could be. They expect government to keep the clinical services as NHS while everything else goes to a "private sector partner".

For political reasons hospital closures are unlikely, but some 'hospitals; which remain may end up as "simply buildings with an NHS badge".


For the workforce the future is uncertain - privatisation, TUPE transfer to either NHS or non-NHS employers, and job losses either way.

For patients - closure and merger of specialist units, and a "70% reduction in activity" as is planned in NW London.

As usual the privateers are trying to use problems they themselves have created to continue on down the route of a failing, fake market.

NHS managers usually call for extra funds, (bail-outs) so they can pay the PFI for a few more years, but now even some of them are calling for renationalisation - but the question is will the DoH be willing to pay the compensation?

The union leaders call for "ending" PFI deals. After the South London fiasco both Christine McAnea of Unison and Rob Macey of GMB called for renegotiation or termination of the deal, whilst leaving it unclear what this could amount to.

But a motion agreed at last week's Unite conference shows the way ahead. It calls for nationalisation without compensation of all PFI schemes.

Three years ago Socialist Party members tried to get this adopted at Unite's Health conference and it was amended to delete "without compensation".

This year, the motion calling for nationalisation without compensation went through unanimously. It is the only way to tackle and end the nightmare of PFI which will wreck much of the NHS if it is not confronted properly.

Wales: Fight the new health cuts

The leaders of Labour-affiliated trade unions in Wales often say: "The NHS is under attack... in England" But, as delegates at the recent Wales Shop Stewards Network Conference reported, Wales faces health spending cuts as bad as, or worse than, any area of England.

Now comes news of the closure of Afallon ward at Bronglais hospital in Aberystwyth. Shortages of qualified staff threaten, the Health Board told BBC Wales, the ability to provide "appropriate and safe care for patients on that ward".

Earlier this year, hundreds of concerned Aberystwyth residents travelled to Cardiff to lobby the Welsh government over fears that services would be lost from the hospital.

Bronglais is part of the same local health board, HywelDda, as Prince Philip Hospital in Llanelli where residents are fighting to retain their accident and emergency unit and last month held their own lobby of the Assembly.

NHS campaigners must link up, first on a health board basis and then across the whole of Wales, to take their fight to the (Labour) Welsh government and demand they stop passing on Tory cuts.

Trade unionists in Wales should demand that leaders stop trying to hide the scale of cuts to Welsh health services.

Ronnie Job

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In The Socialist 11 July 2012:

Socialist Party NHS campaign

LOOTED! PFI empties NHS coffers

Fight Profit From Illness

Save Worcestershire A&E services

Socialist Party editorial

Libor scandal exposes rotten racketeering system

Lords reform - Abolish the House of privilege!

Save our server!

Youth Fight for Jobs and Education feature

Fight for a future for the 99%

The politics of fighting the racist EDL

Pride should be about protest, not profits!


Workplace news and analysis

London bus workers discuss new offer: "militant strike action pays"

Build the fightback against the Con-Dems: Join the lobby of the TUC on 9 September

Single status appeal: Victory for Vine workers

Sheffield recycling workers win victory against sackings

Vote no to the local government pension offer

Workplace news in brief

International socialist news and analysis

Egypt: Will Mursi's presidential election victory bring real change?

Socialist Party reviews and comments

TV Review: Britain on the brink - back to the '70s

The Shard: As useless as a hole in the ground

Ringing bells in the GMB

Minimum wage, minimum security

Socialist Party news and campaigns

TUSC continues to build support in Liverpool

Leeds protest at prison privatisation rally

Help boost sales of the Socialist

Socialist Party Summer Camp


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