PFI - public finance indiscretion
It has seemed odd to me for years that no-one has understood that PFI
hospitals are simply huge, public sub-prime mortgages. Four years ago I
said to the Chairman of the Commons Health Select Committee that this was
the case, to be told that if we didn't have them then we would have no new
hospitals - and wouldn't I want to work in a shiny state of the art place?
I replied that I would like to drive a Bentley, but couldn't afford the
hire-purchase payments, so I didn't.
PFI perpetuates debt at exorbitant rates (interest payments are, as
far as I know, fixed at pre credit crunch rates) and in some cases appear
to mean the government is paying money to banks that it actually owns.
The payment terms are 30 years or longer. As Davies points out, the
cumulative debt repayment is gigantic. There is worse, however. In
today's world hospitals have to cover their expenditure with income.
Prior to a reorganisation in my own locality the finance directors of four
hospitals produced a report stating, from their evidence, that the costs
of the three PFI hospitals could not be met from income under PbR. We now
have a situation where two PFI hospitals (one of the original three pulled
out) are joined with a third, non-PFI hospital (mine), which is
immediately vulnerable - in fact, it's like a row of three terraced houses
where the owner of the one in the middle is confronted one evening by the
other two to be told that he (a freeholder) will have to sell up so they
can pay their mortgages. As income is squeezed by the PCTs (may God rest
their souls) trying as hard as possible to persuade GPs not to refer, the
income projected is not reached, making matters even worse.
The banks were prevented from collapse by the government bailing them
out. Perhaps it should now do the same with hospitals, whatever the pain,
and buy out the PFIs. If not, at least it should compel the banks to
reduce their interest demands to current market rates.
Competing interests: No competing interests