PFI – the end of the Beginning
Now I don’t often quote Churchill, Winston that is, not the talking insurance dog, but his famous quote “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning” may be apposite for the Private Finance Initiative – somewhat of a bugbear for this author. Two more bricks tumbled out of the wall this week.
1) “PFI deals should be used “sparingly”, Treasury warns” reports Crispin Dowler in the HSJ yesterday. Although Dowler is referring to the Treasury Select Committee’s views rather than those of the Treasury itself, weight is now gathering against the Private Finance Initiative as a model for development of the NHS’s estate. Dowler notes that the Committee commented “If we assume that the outturn costs of construction, maintenance and services will be the same between the PFI and conventional procurement options, the government could have spent £175m less, [in net present value] terms, by borrowing directly from the capital markets, rather than through a [special purpose vehicle] intermediary,” . Interestingly this assumption is precisely what the Treasury has NOT been doing for the past 15 or more years. They have been stacking the deck against conventional procurement options in a blatant fashion and academics like Allyson Pollock have been describing this jiggery-pokery in great detail for years
2) Also from the HSJ, essesntial reading for all in the NHS, and also from Crispin Dowler, we read that “Trust wins backing to vacate £3.6m PFI unit“. This is most definitely a loose thread that should only be tugged at with extreme caution. Quite rightly the SHA has accepted the service reconfiguration and economic rationale for allowing Manchester Mental Health and Social Care Trust to vacate a PFI-built unit on the Manchester Royal Infirmary site. However this leaves a huge hole in the finances of the Central Manchester University Hospitals Foundation Trust and, obviously, a vacant building that is contractually bound to be serviced and maintained for the remaining years of its (usually) 25 year lease.
I worry that local decisions like this have not been fully thought through for the national precedent that they set. Back in February we learnt that an NHS Trust buys back it’s PFI debt when a MH Trust in the North East successfully made the case that it was cost effective for them to buy out their PFI contract for £18m allowing them to save £2m per annum over what was remaining of a 30 year contract.
As a taxpayer I hope that Financial Directors up and down the country are reviewing cases such as those quoted above to see how they can make their NHS funds go further by ditching existing PFI projects let alone not starting new ones. If FDs find the work of Allyson Pollock a little too radical for them they could do a lot worse than visiting the web site of Tory MP for Hereford and South Herefordshire, Jesse Norman http://www.jessenorman.com/ who is leading the charge against the inequities of the Private Finance Initiative in articles such as Clawing Back the PFI Cash from the Guardian in June 2011 and It’s time to derail the PFI Gravy Train in the Telegraph in January 2011