Greenwich borough’s NHS PFI disaster – who’ll take responsibility?

You may well have already seen the news that South London NHS Trust – which runs Queen Elizabeth Hospital in Woolwich – is on the brink of collapse after being warned it faces dissolution by the health secretary, Andrew Lansley. With debts of £69m recorded in April, the government has warned an administrator could be brought in within weeks, which could see the trust split up and parcelled off to other healthcare providers – including private operators.

It’s the beginning of the end of a misconceived disaster which has cost taxpayers – directly and indirectly – countless millions of pounds. QEH opened in 2001, replacing the old Brook Hospital on Shooters Hill Road and Greenwich District Hospital. GDH was to stand empty for five years before being demolished, and then the site was left empty for a further six years, blighting the community it once served.

As another example of an indirect cost, the re-routing of buses to serve QEH, a former military hospital on Woolwich Common, costs Transport for London £1 million each year.

Under the Private Finance Initiative – introduced by John Major’s Conservatives and continued by Tony Blair’s Labour government – the building was refurbished, and remains maintained by a little-known private sector firm, Meridian Hospital Company, which receives payments from the NHS Trust. This year, MHC is due to get £66.8m under the deal, negotiated in July 1998.

The sums didn’t add up, though. By late 2005, the Queen Elizabeth Hospital NHS trust was declared insolvent. The solution was to merge it with NHS trusts in Bexley and Bromley boroughs – the latter also struggling with PFI debt from the Princess Royal Hospital at Locks Bottom.

From the off, the new, debt-riddled South London NHS Trust struggled. Services at Queen Mary’s Hospital in Sidcup were cut back, with patients packed off into Kent. Finally, it seems the whole edifice has sunk. A merged Dartford-Medway NHS trust is already licking its lips and looking at services in Bexley. As for services in Bromley and Greenwich, they face an uncertain future.

An email sent to staff last night from South London NHS Trust chief executive Chris Streather reads:

We are very sorry that by the time that most of you will read this tomorrow morning, you will have heard media reports about the future of the Trust in the news. We were not told of this decision until late today (Monday) and there are certainly issues about the timing and appropriateness of telling staff before the media which we will be taking up.

In spite of the massive improvements in the quality of care – among the lowest mortality and infection rates now in England – it is true that the financial challenges facing the Trust remain significant. Our Trust, our Commissioners and the Department of Health are all in agreement that this needs to be tackled and in a way which is clear and ends uncertainty which I think has been unhelpful for a long time.

For this reason, we are now in discussions with the Department of Health and NHS London to look at the best way forward. One of those options could be the introduction of the Unsustainable Provider Regime, which would involve the appointment of a special administrator to manage the organisation and produce a report on the best way to deliver financially and clinically sustainable services to local patients.

We expect those discussions to come to a conclusion in the second week in July when a decision will be taken by the Secretary of State. In the meantime, I would like to assure you all that we are here to protect the services for patients, we have all fought hard to improve them and that is what we will continue to do.

A carefully handled intervention which maintains the improvements to safety and quality, while sorting out the long standing financial issues which have beset us and the S E London health sector may well be helpful.

Of course, PFI is a failure of our entire political class. Both Labour and Conservative are beholden to PFI, so nobody will call this out for the disaster that it is.

But I can’t help reflecting that this came a week after the Greenwich Labour Party launched a front campaign, The Greenwich People’s NHS Charter – despite their party’s government leaving our own local hospital in a perilously weak state, and facing the very real threat of private firms coming into pick up the pieces.

Nobody knows quite what will happen to the stricken, ill-conceived mess that is Queen Elizabeth Hospital. But there’s a few people, some enriched by these deals, others still holding public office, who owe its hard-working staff, patients, and the rest of us, an apology. Who’ll be big enough to step forward?

PS. I’m told one large organisation in this borough opposed the closure of Greenwich District Hospital and its relocation to Woolwich Common – Greenwich Council. See, not always wrong, you know.

15 comments

  1. Chris

    The total disaster that is PFI is going to haunt this country for years to come.

    We’re already commited to well over 200 billion pounds under this ridiculous — off balance sheet — scheme. It was the idea of the Tories which allowed their buddies in the private sector to milk the public sector (20 pound light bulbs and the like) and it was taken up with enthusiasm by Brown — to Labour’s eternal shame.

    Private Eye have been warning about it for years.

    What a shame it looks like Greenwich is leading the way on this one.

  2. Chris

    To add to my above.

    “That might mean some tough decisions, but hopefully will deliver financial sustainability in the long term.”

    Look at that quote from the head of the NHS Foundation. Think of what the acronym NHS stands for.

    Is this bloke talking like a provider of health services or a bloody accountant? What a disgrace.

    Nye Bevin will be spinning in his grave.

  3. scperi

    Why can’t the BBC has mentioned this information? Seems like important info to me.

  4. Nelson's Left Eye

    A principle benefit of the PFI programme is that it allowed vital building projects to be bought forward by many years. If tax revenues were only ever used, many of the new hospitals, schools, roads, railways etc. that we see today would still not be built and what they replaced would still be in use.

    Another benefit was that much of the risk inherent in major building projects (especially cost escalations) were transferred over to the private sector with the public sector user benefiting from stable/fixed scheme repayments.

    I’m not saying that the returns offered to private investors have too often been overly generous and implementation has been flawed (a common occurrence under public projects too!), but the gains need to be remembered when criticising PFI.

  5. Chris

    Sorry, Nelson, the private sector doesn’t build hospitals from the goodness of its heart. It sees the public sector as a cash cow to be milked. PLCs are not charities and don’t behave like them. They’re in it for a profit.

    And if the cash cow runs dry, then do a Metronet! Let the taxpayer pay! You know the government can’t let the Underground grind to a halt, hospitals to ‘cease trading’ or schools to close. You’ve got them over a barrel.

    Remember the 800 quid Treasury Christmas Tree? The near one billion overspend on the M25 widening?

    Yes, there are new things but we have paid vastly too much money for them and now over 200 billion quid sits off balance sheet for my children to pay for.

  6. Nelson's Left Eye

    Chris,

    1. The “£800 Treasury Christmas tree” was a rejected quote not an actual purchase. The tree was eventually donated for free.
    2. The “one billion overspend on the M25″ was due to the increase in costs between the original quote being given in 2000 and the eventual contract signing in 2009. Are you saying this would never have happened if more traditional financing methods were used?

    Would you like me to provide a list of all the cost overruns in public works projects that didn’t use PFI, such as the new aircraft carriers that have almost doubled in price?

  7. Chris

    You avoid the point I’m trying to make which is that when it comes to the public sector the private companies are in there for a profit — and if they can get away with rip-offs they will. They are accountable (in name only to all intents and purposes) to shareholders, not me or you.

    Can you seriously say you are happy with PPI?
    Can you seriously say the farce being acted out here will be unique?

    As for aircraft carriers I can only agree. The MoD are a law unto themselves and not fit for purpose. Who would have thought the Tories would be firing people while they are abroad serving their country?!

  8. John

    More to the point, the justification for PFI is supposed to be that it transfers risk to the private partner. While this can happen to some extent with the financial risk (I think it was Jarvis whose school building arm went under, plus the railway maintainers who’ve gone), it can’t happen with the operational risk. The public sector has to keep operating the schools, the tube, the hospitals.

    And when the Jarvis school operation fell over because they couldn’t make the numbers work on their Building Schools for the Future partnerships, it was Fife council that was left with unbuilt, unfinished schools, and had to find somewhere for the kids to go at the end of the summer holidays.

    Further, the transfer of financial risk is a chimera in itself, because the private partner makes damn sure it’s got plenty of margin to take account both of its higher interest rates, and of its need to make a profit (well, Jarvis didn’t, but …). So, the pricing only looks cheaper if the figures for the notional ‘public sector comparator’ are distorted.

    Then, we move into the annual payment regime, where the private sector partner has probably severed the property element (paying for the 30 year lease), and sold on the maintenance element, to a further company that sees this as an ongoing cash cow. So now, the NHS is tied to a contract where, if they want a shelf put up, or a coathook moved, it’ll cost.

    In the old days, you rang the estates department, and they came and made the change. Now, you raise an order, make a contract variation, sort out the purchase order and the cost centre code, and then pay through the nose. It doesn’t take many of those before you’ve surpassed the wages cost of an estates department handyman, several times over.

    PFI is, and always has been, an accounting trick.

  9. Nelson's Left Eye

    No, Chris, you avoid *my* point.

    You slam on about the perceived ‘inequity’ of the private sector but completely disregard the fact that the private sector is far more efficient than the public sector. Private companies have to be efficient to survive in the Darwinist marketplace, whereas the government, a self-regulated monopoly, bears no such burden.

    Instead, you go off on some irrelevant tangent about “firing people while they are abroad serving their country”.

    I also still see zero response from you regarding the state public services would be in if we didn’t have PFI and instead waited until there were sufficient tax revenues to build the many new hospitals, schools, roads, railways, police stations, leisure centres, libraries etc. etc. we have today.

    Furthermore, total annual PFI costs account for…ready for this?…around 1% of public expenditure. Yes, one per cent. Again, remember all the PFI projects that are now operational instead of still waiting for funding.

    What did *you* think the annual cost was?

    Any chance of a balanced debate based on facts instead of ill-informed partisan and selective bombast?

  10. Chris

    ‘Any chance of a balanced debate based on facts instead of ill-informed partisan and selective bombast?’

    No. This is already hopeless in that you’re not going to change my mind and I’m not going to change yours. But let the readers of 853 decide who’s right.

    You put ‘inequity’ in quotes. Where did I say that?

    ‘Private companies have to be efficient in the Darwinist marketplace……’ Yes, they do. But dealing with the public sector is not the same as the commerical marketplace. There is the knowledge that if you get your sums you wrong you abandon ship and let the taxpayer pay. Metronet.

    The irrelevent tangent I went off was in response to your comment about aircraft carriers. Apologies.

    What is your point about annual costs? Your figure is selective anyway, 16 percent of South London Health Trust’s income has to be set aside for PPI payments. Again, you ignore the off balance sheet aspect of PPI.

    With your blinkered Friedman style of economics you just look at numbers and forget there are human beings involved. Again I ask you to look at the quote —

    “That might mean some tough decisions, but hopefully will deliver financial sustainability in the long term.”

    Remember that this a health care provider talking, not the Chairman of a Fortune 500 company.

    Do you not find that incredibly sad? He’s talking money, not people.

    Cheers.

  11. Omar

    Sorry Chris but it’s just horribly naive to view healthcare as being totally separable from economic reality. A hospital is a piece of infrastructure that consumes resources to build, no different to a gleaming corporate office building. Yes there’s an element of vocation in the staffing model, especially in nursing, but a doctor is not treating patients out of the goodness of his heart, but rather is very much part of the “1%”. Junior doctors putting in their 90 hour weeks aren’t doing anything *much* more special than the junior investment bankers slaving away on their career path. It’d be lovely to change human nature to suit political idealism but it just isn’t going to happen. PFI was a way to bring forward the government’s ability to improve infrastructure and all this comes at a cost.

    The root of the matter is not “corporate greed” but either (1) the usual political & civil service incompetence in not understanding the financing structures they were signing up for or (2) worse, something that was entered into with eyes wide open as part of successive (but mostly Labour) governments acting for the short term electoral cycle rather than in the true interests of the country.

    The Singaporean model provides an interesting contrast – practically a dictatorship so certainly not holding it out as an exemplary model, but they send off their very best to the best universities with full scholarships and salaries provided they come back and work for the civil service. A top minister can make over $2m a year and this obviously pulls in the very best subject matter experts. The result is that there is no question of the government being incompetent and out of touch in the same way that career politicians here often are.

  12. Understands Nothing

    Nelson,

    One point that your missing is that yes – we got to build hospitals and schools today – but what’s the long term cost of that? Essentially we’re deferring the cost and the problems for our kids. What happens when we need new hospitals in the future but we’re still paying for the hospitals we’d built in the past? Our kids will have the crappy services we’re managing to avoid now, but not be in a position to do anything about it.

    If we need infrastructure building we should pay and account for it properly – not pass the problem on further down the line.

  13. Richard

    It would be lovely Chris if we could talk about people instead of money. In the real world resourses are scarce and in the NHS want is infinite. I guess we should all be comfoted that at the core of the NHS are the selfless doctors. Oh hang on….

  14. John

    So, we can agree that resources are limited and the NHS could absorb all the cash we’d like to give it – that’s an argument for rationing, evidence-based prescribing, and all the rest, all the stuff NICE was meant to do nationally and the Strategic Health Authorities (now commissioning groups, I guess) were meant to do locally.

    There are inefficiencies in the NHS, just like there are in any organisation, but that’s an argument for improving efficiency, not for simply saying “the private sector is far more efficient than the public sector” and selling off service provision to the lowest bidder.

    As for saying we needed PFI to meet the infrastructure costs, and things would have been delayed if we’d waited to have sufficient tax revenue, that’s a slightly odd argument. We wouldn’t have put tax money into the big government piggy bank until we had enough saved to build a new hospital, we’d have borrowed or issued bonds, and paid them off over the next 20 or 30 years from ongoing tax revenue.

    As it is, we pay off the private sector costs over the next 20 or 30 years from ongoing tax revenue – from a cashflow perspective, it would have been just the same repaying bonds, just quite a lot cheaper. But, the PFI borrowing could be concealed from the public sector balance sheet.

  15. Pingback: Lewisham A&E under threat – a danger to all SE London « 853

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