Tuesday, August 23, 2011

Emperor’s New Clothes: PFI

This time the Emperor wants to be invisible so PFI was “invented”.

The private finance initiative was devised to get schools, hospitals and roads built without swelling the government's overdraft. Critics discerned a conjuring trick. Instead of the state borrowing, private consortiums did, and then the public paid – at a premium rate. It has often been likened to sticking a mortgage on a credit card; but Whitehall always resisted that charge.

It was just too important to flatter the books, especially to Gordon Brown. His twin obsessions were constructing temples to New Labour's social policies and establishing his prudence: PFI appeared to further both. But the trickery was too flagrant. Friendly thinktanks were tasked with devising a rationale couched in the language of public-private partnerships. It was said that City expertise would somehow foster efficiency. Henceforth PFI was all about improving the allocation of risk. Beautifying the books had nothing to do with it.     

Here are the emperor's own "children" and a few others:

In a damning report, the Treasury select committee says that with the yield on government bonds at near-record lows, using a PFI deal for a new infrastructure project could end up costing up to 1.7 times as much as paying for it directly out of the public purse.

"The cost of capital for a typical PFI project is currently over 8% – double the long-term [30-year] government gilt rate of around 4%. The difference in finance costs means that PFI projects are significantly more expensive to fund over the life of a project. This represents a significant cost to taxpayers," the report finds.


"In other countries this would be called looting, here it is called the PPP."                                       Boris Johnson: Mayor of London.

"Londoners will also be outraged that the Tube upgrades promised to them are now threatened," said Johnson. The mayor claimed that Tube Lines's co-owners, Ferrovial, the Spanish owner of Heathrow airport, and Bechtel, the US project management specialist, will be paid £400m in management secondment fees by 2017.

Public private partnerships (PPPs) are arrangements typified by joint working between the public and private sector. In the broadest sense, PPPs can cover all types of collaboration across the interface between the public and private sectors to deliver policies, services and infrastructure. Where delivery of public services involves private sector investment in infrastructure, the most common form of PPP is the Private finance initiative
Private Finance Initiatives are intended to harness private funding for public building projects, such as schools and hospitals.
Under the schemes, introduced in the 1990s and expanded under Labour, private firms pay for work on buildings, then lease them back to local authorities on a contract of up to 25 years.

PFI makes me particularly angry. It is a guaranteed loan to property investors, where high-rate mortgage payments are kept off-balance to reduce the country’s declared debt. In other words, it’s the Enron of the NHS. This is money the NHS has committed to leave frontline healthcare for the next 35 years.”                                                                      

                                                                                                              Dr Helena McKeown
In NHS: Free Advicea Professor of Medicine
The best advice is often free. Yet our government would prefer to spend millions (or was it billions) to buy them from people whose only motive is to get the easiest money they can lay their hands on: government money. Just look at Greece. Here in the UK, despite the fact that we have failures like Metronet, we still have other PPP/PFI projects.

We might get new hospitals that look like airport lounges but what about the doctors and nurses when we cannot afford them. Or are these places only there to house the ever increasing numbers of managers. What about the patients? Patients, did you say?

One Professor of Medicine was giving out his free advice in the Times: 
The internal market has been a costly disaster. Let the professionals manage medicine
This may sound familiar to those of us that were brought up the old fashion way in Medicine:

“……When I started in medicine, the hospital was run by about three people. Things were so much more simple when doctors and nurses treated patients, doing their best without the guidance of guidelines and targets, doing their best ... yes ... to make the patients better. How did we manage without forms to fill and waiting times compliance? Quite well actually. The medical director ran the medical side of things while matron and the accountant handled the rest.”

“It wasn’t much of a business then: it didn’t have to be, because there was no internal market to manage.”

“The internal market ……..has wreaked havoc. It has spawned a nation of administrators, here today and gone to another post tomorrow — while doing nothing to bring costs under control.”

“There are savings to be made. It is alleged that there are just 75,000 administrators at work in the NHS but this figure is laughably mythological. Doctors and nurses know that there are many more than this. They look around and see the numbers increasing.”

“One report by the Centre for Policy Studies published in 2003 indicated that there were 250,000 administrative staff employed in the NHS: at least one administrator for every nurse. In recent times the rate of increase of admin staff within the NHS has exceeded that of nursing staff.”

“……The principle of care for all from cradle to grave is worthy and wonderful. But the current reality is a cradle rocked by accountants who are incapable of even counting the number of times that they have rocked it……..” These are the very same people we pay market rate or they will go elsewhere!!!

“……Over the years politicians have made dramatic changes to the way that the NHS has been run. Recent changes have caused fragmentation and not led to any cost saving……”

“Moving patients from one place to another does not save the nation’s money, though it might save a local hospital some dosh.”

I have personally experienced a Trust buying a house for a family to move them to a neighbouring Trust.

It is still the same NHS paying for the care but the CEO of one trust will get more bonus.

“……So the internal market has failed because it does not consider the health of the nation as a whole, merely the finances of a single hospital department, a local hospital or GP practice…….”

Here is the advice:

“……Let us go back to the old discipline of the NHS. Let the professionals manage medicine, empower the professionals, the doctors and nurses and shove the internal market in the bin and screw down the lid…….”

Professor Jonathan Waxman is a consultant oncologist.

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