The repercussions of excessive use of PFIs in the NHS

Posted: 04/07/2012

Private Finance Initiatives (PFIs) are agreements used to allow private companies to fund public sector building projects such as hospitals and schools. Under New Labour PFIs were widely used to fund vast development of the NHS. A total of 103 PFI deals were struck by the previous Labour Government for the NHS with a combined value of £11.4 billion. By the time that they are paid off, they will have cost more than £65 billion. While producing hundreds of new hospitals, the long term repercussions of the use of PFIs, though predicted, are only just beginning to surface.
 
The South London NHS Trust may be the first in a long line of NHS bodies threatened with insolvency because of these liabilities. The dire predictions of the effect on the quality of health care and its availability is a cause for concern for many healthcare professionals. Many fear that the financial failure may lead to clinical failure, as cutbacks are made to try to plug financial gaps.
 
The political row that has erupted over the legacy of PFI for the health service has captured many headlines. With the South London Trust Hospital currently spending 14% of its income on repayments to a PFI agreement and being branded ‘financially unsustainable’, there are now few defenders of the scheme. The Government criticises Labour for its apparent disregard for the long term consequences of using PFIs, but Labour has argued that the current economic climate and wider financial pressures are to blame. The main concern is that a number of other hospitals may follow in the wake of South London NHS Trust, while Andrew Haldenby, from the think tank 'Reform', stated that some other PFI schemes had delivered good hospitals and good value for taxpayers. But he warned that difficult decisions about the numbers of hospitals in England could not be postponed. One in five hospitals are felt to be in financial difficulty and if this is not addressed the spiralling costs could lead to hospital closure or a reduction in services.
 
Chris Streather, chief executive of South London Healthcare, said patients could be assured that services would continue as normal. He added: "There is a huge gap in our financial plan in order for us to become viable in the long term and this intervention, if it solves that problem which it is designed to do, is absolutely welcome and will be helpful." At present there is widespread scepticism as to how the Government will be able to rein in costs, maintain efficiency and improve patient care.
 
Although the quality of care has improved measurably and the hospital achieved some of the lowest mortality rates over the last 18 months, with infection rates three times lower than the national average, it does not address the issue that the South London NHS Trust is a financial black hole. Without reductions in debt, its very existence is not guaranteed.

Importantly, despite a failure of core parts of the NHS, this organisation as a whole remains, notwithstanding recent reforms, and arrangements have been preserved in the National Health Service Act 2006 which will provide a guarantee to any liabilities that remain.

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