Shareholders in the first ever hospital Private Finance Initiative (PFI) scheme have grabbed a £37 million windfall. These figures were revealed by the government’s public spending watchdog last week.
The private contractor for THC Dartford used a loan to finance building work as part of the Darent Valley Hospital PFI scheme. In 2003 the contractor refinanced its loan.
The new lower rates of interest mean THC has scooped a windfall of £37 million just three years after the hospital opened, the National Audit Office watchdog said. These extra profits were handed to shareholders, giving them payouts 60 percent higher than when contracts to build the hospital were awarded.
John Lister of campaign group Health Emergency condemned the profiteering: “It was always obvious that massive profits would be made through PFI, but refinancing just adds icing to the cake.
“What has happened with this hospital is the tip of the iceberg. Private companies are making massive profits at the expense of frontline NHS care.”
Dave Prentis, general secretary of Unison, the biggest health union, also attacked the rip-off as “proof positive that companies are making obscene profits from PFI deals”.
He said, “It is clear that Darent Valley Hospital was taken for a ride by the PFI consortium. In exchange for a small share of the refinancing gains they agreed to extend the contract another seven years to 35 years.
“In addition they might have to pay contractors more than the original cost of the hospital if they want to terminate the contract early.”
This is not the only bonanza to fall into the lap of the private firms involved in the Darent Valley PFI hospital.
In December 2003 contractor company Carillion, formerly Tarmac, sold its £4 million share of THC Dartford to Barclays Infrastructure Ltd—for a whopping £16 million.
Dave Prentis said, “This is profiteering from taxpayers, pure and simple. Shares in PFI hospitals are now bought and sold on the secondary market by people who don’t know and don’t care about the patients or the hospital staff. Companies make a quick buck and we are now in the sorry position of not even knowing who actually owns our hospitals.
“How many more damning reports do we need before the government sees sense and stops using PFI?”
Although privateers are raking it in from the Darent Valley deal, patients have not been so fortunate. Since the hospital was opened in 2000, there has been a chronic shortage of beds. At one point hospital bosses resorted to counting trolleys as part of the official bed count.
Problems with the design of the hospital mean some corridors are so narrow that there is barely room for both a hospital trolley and the staff needed to look after the patient on it.
“The hospital is just too small. They are currently having to build extra wards because there is still a real shortage of beds,” said a worker at the hospital. “They make a horrendous amount of money. But some people who work here earn less than £5 an hour.
“The layout of the hospital makes running it much more difficult. For example, the porters’ station is on the far side of the hospital. The hospital is quarter of a mile wide, so the porters can have to walk all that way just to reach the patient. They should be stationed centrally.”
And Darent Valley is not the only place where private companies are wringing extra profits from PFI.
The National Audit Office is investigating both refinancing and sales of equity stakes—the money invested in PFI projects—by private companies.
The refinancing and shares trading mean extra profit for investment and contracting firms off the back of public services.
The firms are selling on their stakes in the PFI projects, typically for twice their original value and sometimes three or four times as much, according to reports in the Financial Times. The total market for buying and selling these stakes in our hospitals and schools could be more than £6 billion.
Since 2002 private companies have been forced to hand over half their gains from debt refinancing to the public sector. But there is nothing to stop the privateers keeping all the extra profit from sales of their stakes.