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Real cost of PFI exposed

30th October 2006

01052006_construction1.jpgTaxpayers will pay an extra £45bn over the next 30 years as a result of the controversial PFI scheme.

Eventual repayments for 83 hospital building schemes worth £8bn will cost more than seven times that, according to new figures obtained by the Conservative party.

The Tories first introduced Private Finance Initiatives 14 years ago, but now they have rounded on the government over the scheme, claiming it has ensnared NHS hospitals in a financial straightjacket and called for a review into funding of future capital projects.

Under PFI, a private company builds a hospital and receives annual ‘unitary payments’ from the NHS for around 30 years. The costs include maintenance of the buildings for the lifetime of the contract.

Shadow health secretary Andrew Lansley says this has locked the NHS into mortgage-type payments for up to 40 years for buildings that the health service may not actually need because the government is talking about moving healthcare away from hospitals.

The scheme began under the Conservatives but was stepped up under Labour in its hospital building programme.

Campaigners against PFI have always warned of the extra cost and have now accused the Conservatives of hypocrisy, while the Department of Health dismissed the claims, saying the figures do not reflect the full value of PFI contracts



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peter ross

Tuesday 14th November 2006 @ 6:04

I understand that it has been accepted that the Tories exaggerated the overall contract costs for hospital pfi contracts. They "fiddled the figures" by including the costs of operations and maintenance (costs that the government is exposed to anyway) as capital costs, thereby inflating the so called "capital costs" of the projects.
This, the Tories concluded, verifiy that pfi is a bad thing - I disagree.


While I regard myself as a leftie (I was a Communist before it became unfashionable in Australia) and had a measure of suspicion and ambivalence to pfi, I bacame involved in two projects in Australia - as the Director of schemes to build new schools in New South Wales. From that point I became a "convert" to pfi. At the time I had worked for the Education Department as a senior public servant for 20 years in construction and maintenance of schools and technical colleges (I'm now semi retired). Pfi largely resolves the problems that the government visits on the public sector.


The "expensive" element of pfi largely relates to the cost of borrowing money, but that alone. There is a lively debate as to whether governement could borrow the money cheaper than the private sector and therefore save money. There's no doubt that they could however, there is no other element of scoping, designing, building and maintaining schools and hospitals that governemnt can do better than the private sector.


What governments do do well in these areas is underfund them. The tricky thing is that pfi contracts demand of the private sector facilities that are well maintained and operated and that costs money - money that government does not give the public sector under current funding arrangements.


By the way, we here do not transfer "core" public sector operations and administrative staff - a policy that I agree with.


I would be interested in contributing - please advise whether the forum or the Viewpoint section would be the most appropriate area for me.


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