Tuesday, 4 September 2007

management beanfeast

As far as many of us can work out, PFI is a system designed by politicians to make their friends lots of money, and to make the rest of us pay.

This is an example (from the Guardian) of how it works in Coventry:

In Coventry it had been planned to refurbish two hospitals at a cost of £30m. But analysts realised that business would not be interested. The scheme was too small, and there was no scope for the financial innovation that could produce serious profits. As a confidential report by the local health authority showed in 1998, the health service redesigned its scheme to make it more attractive to private capital. Instead of refurbishing the two existing hospitals, it would ask private business to knock them down and build a new one - the University hospital. This would cost not £30m but £174m. The health experts who wrote the confidential report predicted that in order to find this money, the hospital trust would have to cut both beds and services. They have just been proved right.
Did I say £174m? I beg your pardon. By January 2002 the price had risen to £290m. A month later it reached £311m. By the end of that year it had grown to £330m. In 2003 it was estimated at £370m. In March 2007, the Birmingham Post reported that the final cost was £410m. This year the hospital trust must find £56m, covering repayments and service fees, to hand to the private consortium. The annual cost will rise in line with the retail price index for 30 years.
It is now pretty obvious that this fee is unpayable, if the hospital is to maintain a proper standard of care. Over the past few days the hospital trust has announced a £30m hole in its budget. Around £10m of the necessary cuts could be found by making staff redundant: it will lose perhaps 200 people, possibly 375. It will also rely on "revenue generating activities". These include charging people £3 for dropping their sick relatives outside the hospital, and £10 for parking there, while cancelling the free parking scheme for disabled people. As the new hospital is on the edge of the city (against the wishes of 160,000 people who signed the Socialist party's petition to have it built in the centre), which means that it is hard to reach without a car, this is an effective way of raising money. But it casts doubt on the government's claim that the NHS remains free at the point of use.
The hospital trust's press officer told me that this cost-cutting is a unique event: "We have always balanced our books up to this year." But in 2005 - the year in which the PFI payments began - a leaked memo revealed that the trust was anticipating a deficit of £13m by the end of the financial year, and "drastic measures" were required to plug the gap. These included the closure of one ward, the removal of eight beds from another, limiting the opening hours of the surgical assessment unit and the "rationalisation of certain posts": which meant, eventually, cutting 116 jobs.
In 2006 the local newspaper reported a shortfall of £29m. This was met partly by freezing the recruitment of district nurses. In January this year, the hospital announced that it was closing another ward, just six months after it had opened. Yet another ward - where people with acute conditions such as pneumonia and strokes were treated - was closed in June. The impact of these cuts is already being felt: three months ago the new hospital found itself in the bottom 10 in the national league table for waiting times. Where will the money come from over the rest of the 30-year PFI contract?
There is one set of costs the hospital cannot cut: the money it must pay every year to the private financiers. In September 1997 the government declared that these payments would be legally guaranteed: beds, doctors, nurses and managers could be sacrificed, but not the annual donation to the Fat Cats Protection League. The great free market experiment looks more like a corporate welfare scheme.

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