Hospitals hit by ‘Wonga-type’ PFI
Tuesday 17th September 2013, 6:50PM BST.
Hospitals are being bankrupted by “Wonga-type” Private Finance Initiative (PFI) deals which saw one hospital pay £52,000 to put a lock on a door, the Liberal Democrat conference heard today.
The conference was told that under the controversial contracts set up by the last Labour government, the taxpayer is paying millions of pounds in interest, often many times more than the new hospitals would have cost if they had been paid for upfront.
If NHS chiefs want to make improvements to the hospitals, they are still tied in to the same PFI deals and forced to pay thousands of pounds for simple work which should cost a fraction of the total amount, Lib Dem councillor Chris Maines said.
Mr Maines, an accountant who has investigated the PFI contract to build Princess Royal University Hospital in Bromley, Kent, said it should have cost £118 million to build. But because it was paid for under PFI, it actually cost the taxpayer £1.2 billion.
And he told the conference that when nurses at the hospital wanted to put in a lock for the family bereavement room, that would have cost £750 under normal circumstances, it ended up costing £52,000 as it had to be bought through the company which had the PFI deal.
Speaking to Lib Dem members in the main hall, Mr Maines, 51, said: “We have heard that these costs are bankrupting some trusts. We know the solutions when individuals are having a problem with creditors, you sit them down and find out what Wonga have done to them and try and talk to those creditors and try and renegotiate.
“We have to try and do that with PFI providers. These debts are unaffordable at a time of austerity and must be renegotiated. The problem is that when Labour drew up these contracts, the Treasury issued deeds of safeguard – cast iron guarantees which will ensure PFI providers will get their money.
“Annual PFI charges have first call on NHS resources. Many of us know the shady practices of pay-day loan companies but in comparison the activities of the PFI providers, with their offshore tax havens, avoiding UK tax, put those pay-day loan companies in to oblivion. This is a huge problem.
“In 2007, (then Labour Chief Secretary to the Treasury) Andy Burnham boasted that these were the right schemes offering value for money. Let me tell you about (Princess Royal University Hospital) Bromley – the building and equipment for a new hospital cost about £118 million but the PFI repayments will total £1.21 billion over 30 years.
“What is more obscene is when nurses wanted a lock on a counselling room for bereaved relatives. The lock cost £750 but the PFI repayments will total £52,000 for that £750 expenditure.
“Bromley hospital trust is not sustainable, so what have they done as they are contributing a £1 million loss a week – they closed Bexley hospital, which is a non-PFI. They are still losing money, so they are closing services in Lewisham, another non-PFI hospital.”
Peter Ramrayka, 69, a former director for South West London and St George’s Mental Health NHS Trust, said “financial strait jackets” faced many hospitals.
Mr Ramrayka, who is now a management consultant for health trusts, said the PFI system was “unravelling”, 16 years after it was first introduced for hospitals by Labour.
He said PFI companies were involved in “rampant pass-the-parcel arrangements”, with equity in one hospital being sold off four times since the initial contract was signed. In another case, a contract was renegotiated and the PFI provider made £43 million in profit.
Mr Ramrayka said: “In any environment that would be scandalous. In our current climate of austerity, it is completely unacceptable.”
He added: “PFI hospitals, locked in to unaffordable contracts, are on the brink of bankruptcy.
“We recognise that efforts have been made by the Department of Health to partially support trusts affected by these deals. But piecemeal action will not radically and immediately solve the problem because tied in to Wonga-type contracts, PFI (hospitals) are struggling to stay afloat while faceless finance companies broadly unknown in the communities in which they operate make enormous sums of money away from public scrutiny.”
Following the two speeches, members of the party voted overwhelmingly to support a motion which called for the names of all PFI contractors to be published, along with the duration of the contracts and the profit margins.
It also called on the Government to support NHS trusts who want to renegotiate their contracts to get a better deal.