Cash-strapped hospitals will have to fork out a further £55 billion to banks and building companies, according to a report published on Thursday.
The IPPR think tank report found that hospitals still have to pay this vast sum under private finance initiative (PFI) schemes. This means hospitals will have paid £80 billion by 2050—for infrastructure worth £13 billion.
This is money that should have gone towards patient care. And PFI continues to absorb money at a time when the Tories want to slash £20 billion from the NHS by 2020-21.
Some hospitals are paying as much as 17 percent of their annual income to PFI companies.
Sherwood Forest Hospitals NHS Foundation Trust in Nottinghamshire has a £326 million worth of infrastructure built under PFI. In 2018-19 it paid out £50 million— 17 percent of its income—and will have to pay out for decades.
PFI was first set up by the then Tory prime minister John Major in 1992, but it ballooned under Tony Blair’s New Labour. It was seen as a cheap way of building hospitals, schools and other public infrastructure without debt showing up on the government’s books.
Usually, the government would allocate money to build a hospital, then subcontract the work to a private company, then get the keys when it was finished.
PFI sees hospitals set up firms called Special Purpose Vehicles (SPVs).
The SPV borrows money from banks to fund the project and then subcontracts the building and future maintenance work. Once the infrastructure is built, the hospitals pays rent for using it and for any maintenance.
The big winners are the banks and multinationals that own the SPVs.
“In 2018, the chancellor told us ‘PFI was dead’,” said Chris Thomas, IPPR health fellow. “Our analysis shows it is actually alive and well—thanks to a government refusing to take decisive action.
“That means toxic PFI contracts are still driving billions away from patients and into private bank accounts.”
The PFI scam is a sign of the chronic underinvestment in NHS infrastructure.
The IPPR said "Since austerity began, capital investment has fallen off a cliff. Capital budgets have been regularly cut, leaving spend at record low levels compared to comparator countries.
"This has been driven by the health service’s struggles to make ends meet day-to-day, forcing the NHS to use its capital to patch up running costs. Over the last four years, £4 billion has been transferred from the capital allocation."
The report found that the British government’s capital investment in health has fallen far short of other OECD developed countries since 1975. It says, “The UK has rarely spent above the OECD average on capital in healthcare—a level that would be relatively unambitious given the size of its population and economy.”
The only time British capital investment exceeded the OECD average was when PFI was most used.
But the report concluded that “PFI has ultimately proved particularly poor value for money.”
Labour has pledged that it would no longer use PFI schemes and suggested setting up a public fund to help hospitals with repayments. But this would still see corporations get their hands of public money that should be spent on improving services.
A Labour government should scrap PFI schemes without any compensation to the private corporations.
The banks and building bosses should not profit from illness. The appalling lack of capital investment in health shows that they should be nationalised under democratic control and used to direct investment to social needs.