Cookie policy notice

By continuing to use this site you agree to our cookies policy below:
Since 26 May 2011, the law now states that cookies on websites can ony be used with your specific consent. Cookies allow us to ensure that you enjoy the best browsing experience.

This site is intended for health professionals only

At the heart of general practice since 1960

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

 

Rate this article  (3.67 average user rating)

Click to rate

  • 1 star out of 5
  • 2 stars out of 5
  • 3 stars out of 5
  • 4 stars out of 5
  • 5 stars out of 5

0 out of 5 stars

Readers' comments (16)

  • Chand helpfully outs himself as a Labour Party stooge.

    Unsuitable or offensive? Report this comment

  • Give the private companies a hair cut..

    Unsuitable or offensive? Report this comment

  • @Stelvio
    Common Knowledge that Dr Chand is Labour.
    But what have the Tories ever done for the NHS?

    Unsuitable or offensive? Report this comment

  • well what i dont understand is why the government simply cant say 'we are not paying, you are ripping us off' and do some sort of financial review, and then put good lawyers on it (like the ones that NHSE used against junior docs and dr chris day) and get rid of it.
    its ridiculous the amount these things are costing.

    cant they just say 'its austerity, we all have to make cuts and HMG cannot afford to pay these, so f off'

    Unsuitable or offensive? Report this comment

  • Tiny matter of contract law getting in the way of this otherwise brilliant wheeze. Of course if you don't believe government needs to obey the rule of law then there isn't a problem.

    Unsuitable or offensive? Report this comment

  • Does the government hold the contract or does the hospital hold the contract?
    Is there anything to stop the NHS trust going bankrupt? The hospital would then be sold off to the highest bidder. Due to planning laws etc it is unlikely a private firm will want to buy it if the only feasable use is NHS.
    Might be worth a try!

    Or did the government guarantee the loans, in which case this is 1st class incompetence. If you're going to rob savers and non asset holders by printing money you have a duty to doing it in the most efficient way possible, even if it is politically embarrassing. PFI seems solely devised to avoid politically embarrassing national debt figures.

    Unsuitable or offensive? Report this comment

  • Another way to provoke a run on the pound if government contracts are viewed as worthless.

    Unsuitable or offensive? Report this comment

  • PFIs weren't about massaging the debt figures, they were about transferring public funds to private companies (Many of whom are off shored) under the guise of financial prudence.... if a company can make profit from a PFI then it is perfectly clear government investment of the same amount would have avoided the interest payments..... they were ALWAYS a bad idea for the tax payer

    Unsuitable or offensive? Report this comment

  • A contract is a contract is a contract. Do the contracts allow for them to be bought out pre term at agreed by both parties levels.? If so this is not unreasonable. If they do not then we are going the way of Venezuela......."The master plan is that parliament will assess the appropriate level of compensation"

    Unsuitable or offensive? Report this comment

  • PFI was also espoused by Labour, probably as many PFIs under Gordon Brown than anyone else. And No Kailash -- the PFI companies won't roll over. The government and civil servants were shafted once and if they try to orchestrate a buy out they will be shafted again.
    I get you are openly in thrall to Labour but don't let allegiance blind you.

    Unsuitable or offensive? Report this comment

View results 10 results per page20 results per page

Have your say