The government’s criticisms of PFI don’t add up

Private finance initiatives (PFIs) seem suddenly to have become the scourge of the NHS. The Daily Telegraph reported on 21 September that the health secretary, Andrew Lansley, “says he has been contacted by 22 health service trusts which claim their ‘clinical and financial stability’ is being undermined by the costs of the contracts, which the Labour government used extensively to fund public sector projects. The Daily Telegraph can disclose that the trusts in jeopardy include Barts and the London, Oxford Radcliffe, North Bristol, St Helens and Knowsley, and Portsmouth” (www.telegraph.co.uk/health/healthnews/8780363/NHS-hospitals-crippled-by-PFI-scheme.html). It continued: “There is already evidence that waiting lists for non-urgent operations have begun to rise as hospitals delay treatment to save money. Adding to this are growing fears over the impact of the financial crisis on care this winter.

“Mr Lansley told the Daily Telegraph: ‘Over the last year, we’ve been working to expose the mess Labour left us with, and the truth is that some hospitals have been landed with PFI deals they simply cannot afford. Like the economy, Labour has brought some parts of the NHS to the brink of financial collapse. Tough solutions may be needed for these problems, but we’ll help the NHS overcome them. We will not make the sick pay for Labour’s debt crisis.”

The same story was duly reported in the Independent (www.independent.co.uk/life-style/health-and-families/health-news/hospitals-face-collapse-over-pfi-2358947.html), but incredulity was mounting. In the Guardian Polly Curtis set about investigating the claims and said, “I think it’s fair to conclude that Lansley’s claim that the 22 trusts are ‘on the brink of financial collapse’ is disproportionate” (www.guardian.co.uk/global/2011/sep/22/reality-check-nhs-pfi). She made the observation that these hospitals had claimed that their PFI bills were preventing them from becoming foundation trusts, but when she asked the Department of Health what this meant, it responded with, “Up to 22 hospitals have identified their PFI contract may act as a barrier to achieving clinical and financial sustainability and securing FT [foundation trust] status.” So no mention of imminent collapse, then.

On 23 September the Independent said that “a number of NHS trusts on the list expressed bemusement and anger that they had been included, and said the first they knew of the supposed financial difficulties over PFI was when they read about Mr Lansley’s comments” (www.independent.co.uk/life-style/health-and-families/health-news/hospitals-furious-at-lansleys-debt-claim-2359499.html). The article quoted one trust executive as saying, “To suggest that our financial problems are about PFI is nonsense. And we certainly never contacted the Department to say that. The problems that we face are about having to cut our budgets by 4 per cent every year for the next four years.” The Guardian also reported that of these 22 trusts “the Department of Health’s own latest quarterly assessment of the NHS’s performance rated 17 of them as ‘performing’ financially between January and March 2011. Only four were deemed ‘underperforming,’ while the performance of one, South London Healthcare, is ‘under review’” (www.guardian.co.uk/politics/2011/sep/22/lansley-hospitals-pfi). The timing of Lansley’s news seemed curious; the Health Service Journal pointed out that it had published an article headlined “Exclusive: government admits PFI deals mean 22 trusts will struggle to meet foundation status target” in April.

Though dissection of Mr Lansley’s claims about the trusts’ financial viability was widespread, less examined was his inference that the Labour government instigated and propagated unaffordable PFI schemes in the NHS. Channel 4 News did report, though, that “new hospitals . . . were funded by the then Labour government’s enthusiastic embracing of a Tory idea: private finance initiatives. Under PFI the up-front costs are put up by private investors. Trusts [are] left with a mortgage to repay the debts” (www.channel4.com/news/pfi-hospitals-on-the-brink).

What really happened? In her book NHS Plc (reviewed at BMJ 2004;329:1349, doi:10.1136/bmj.329.7478.1349) Allyson Pollock says, “In 1996 the necessary legislation still had not been put before parliament. The fate of the PFI therefore hung in the balance as the Major government, mired in scandal, headed for defeat by Labour in the 1997 election, and Labour’s attitude to it became one of the tests of its pro-business credentials. Within weeks of taking office Labour announced its support for the PFI.” There have, of course, been warnings about the state of PFI contracts long before now. Back in 1999 Gaffney and colleagues began a debate article in the BMJ with the assertion, “The private finance initiative substantially increases the cost of hospital building. Total costs (construction costs plus financing costs) in a sample of hospitals built under the private finance initiative are 18-60% higher than construction costs alone” (BMJ 1999;319:116, www.bmj.com/content/319/7202/116.full). In 2005 the chairman of the Public Accounts Committee, under examination, said of an early PFI project, “I never want to see an Accounting Officer appearing before this Committee defending what I believe to be the unacceptable face of capitalism in relation to the public sector” (www.publications.parliament.uk/pa/cm200506/cmselect/cmpubacc/694/5111611.htm). In 2009 the then shadow chancellor, George Osborne, wrote, “On PFI, we are drawing up alternative models that are more transparent and better value for taxpayers” (www.guardian.co.uk/politics/2009/nov/15/will-hutton-george-osborne-debate). But this year it was reported that Mr Osborne has taken £6.9bn (€7.9bn; $10.8bn) of PFI projects forward since the general election (www.guardian.co.uk/politics/2011/apr/18/george-osborne-backs-pfi-projects).

So where’s the truth? We have a health service facing cuts, and a health secretary telling us that it wasn’t his government’s PFI contracts that might bankrupt the health service. But there was no bankruptcy in sight anyway. At least, not yet. Better questions might be: who are the winners in the PFI partnerships, and why aren’t we listening to the evidence?