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Labour's PFI review could save the NHS billions of pounds

Dr Kailash Chand

John McDonnell’s pledge to review private finance initiative (PFI) contracts is a sensible idea that could save the NHS billions of pounds and is worthy of a proper review.

The pledge is a step in the right direction to reform a deeply flawed, unpopular programme. PFI was introduced as a complex new form of contracting designed to get around public accounting rules. In the process, the private sector under Conservative and Labour governments has generated £831m in profits in the health sector over the past six years alone.

Alarm bells been sounded by the CBI and other vested interests about the cost to taxpayers of implementing Mr McDonnell's policy. John Appleby, chief economist at the Nuffield Trust, estimates that the total cost of buying out all the PFI contracts in the NHS alone could be well over £50 billion. Certain institutions put the figure at £200 billion.

The truth is very different. If you examine the press release sent out to accompany his speech, it did not say that Labour would wind up every PFI deal. Rather, it said: ‘Labour will review all PFI contracts and, if necessary, take over outstanding contracts and bring them back in-house, while ensuring NHS trusts, local councils and others do not lose out, and there is no detriment to services or staff.’

The master plan is that parliament will assess the appropriate level of compensation at the point at which contracts are brought back in-house, and shareholders will be compensated in the form of Government bonds, which will be exchanged for shares.

Private Finance Initiative (PFI) deals have meant paying for hospitals and other NHS facilities many times over – justly compared to the exorbitant repayment rates on ‘pay day loans’. Since the Major government, 717 PFI projects have had a value of £54 billion, but have cost the taxpayer £301 billion!

In many NHS trusts, for instance in South London, this has resulted in huge, unpayable debts which ‘necessitate’ dramatic cuts and closures – sometimes even of neighbouring, financially solvent hospital trusts, such as Lewisham.

Many hospital trusts in England spend nearly 15% of their budget a year repaying their PFI debt – nearly half of which is on interest payments. New research from the Centre for Health and the Public Interest (CHPI) shows just how much these debts are hurting our NHS. Over the next five years, almost £1bn of taxpayer funds will go to PFI companies in the form of pre-tax profits.

PFI has proved a rotten deal for taxpayers because the accumulated annual payments have dwarfed the initial building costs. 

It’s universally accepted that PFI is an unfair, unaccountable rip-off, destroying our NHS. Continuing PFI costs the taxpayer much more over the long term. It allows private financiers and construction firms to make a killing out of public infrastructure, privately owned via offshore tax havens.

As our NHS struggles under the pressure of PFI, Labour’s pledge on PFI contracts is not only a ray of hope, it also provide answers for the future too.

Already, we have excellent precedents – Northumbria Council took out a loan to buy out Hexham hospital’s PFI, and in doing so saved £3.5m every year over the remaining 19-year term.

PFI was an expensive folly. There are cheaper, transparent and fairer ways of providing health care.

Dr Kailash Chand is a retired GP from Tameside and is honorary vice-president of the BMA


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Readers' comments (16)

  • doctordog.

    Sad that politicians cannot be brought to book over poor decisions in their past.

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  • Sure, buy back the PFI contracts with extra public debt which we can dump on our children and grandchildren.

    Great plan guys. Would Dr Chand be so kind as pass on our regards to his Revolutionary Marxist mates in the Shadow Cabinet.

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  • So simplistic. Public sector debt has to shoot up without PFI and similar schemes let alone the COST to pay them out. GP cost rent was the first PFI which improved so many surgeries without adding to national debt.

    Higher public debt means higher interest rates in the end, or use Labour's favoured scheme to print money, which is so last decade as a solution. In the end it leads to inflation, as shown clearly in Hitchiker's Guide to the Galaxy, so we all pay. Printing money only worked recently because everyone else was in recession, the inflation was in capital costs as in house prices to the delight of the chattering classes.

    It wont work again.

    There is so much other waste in the NHS to deal with.

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  • Anyone suprised that the man from the BMA is more interested in the welfare of the NHS than the welfare of Doctors? An organisation that pretends to represent doctors, but is actually an NHS support group, whatever the consequences for it's members.
    This is not our problem Chand, we have rather more immediate concerns of our own.

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  • Vinci Ho

    ''We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.'' George Orwell.
    But it does not justify swinging from one extreme polarity to the other as far as political ideology is concerned. As I always believe , general practice in this country should be driven by centre ground politics but that has virtually gone into extinction under current political climate.
    Never a fan of either Tory or Labour Party . Voted one way or the other previously, purely for a matter of check and balance.
    ''Since the Major government, 717 PFI projects have had a value of £54 billion, but have cost the taxpayer £301 billion!''. Common sense tells you Tony Blair's government cannot be exonerated by this argument.
    We have extraordinary politics right now : a foreign secretary as a fan of Rudyard Kipling (and others in the religion of British imperialism) versus a shadow chancellor as a fan Marx-Leninism. There is no middle ground.
    Sigh ! The older I am , the more I appreciate Dickens's famous opening of Tale of Two Cities :
    ''It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.''

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  • Just Your Average Joe

    Contracts are breakable - our pensions are changed, GMS contract unilaterally changed, Junior Dr contract imposed.

    MPIG forever - no actually not.

    It is just contracts to politicians mates which appear unbreakable!

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