Costs of Calderdale Hospital’s Private Finance Initiative – aka Perfect Financial Incompetence

Calderdale Royal Hospital is notorious for being one of the most costly, least accountable Private Finance Initiatives in the NHS.

Repaying the ever-growing PFI debt currently takes about 10% of Calderdale CCG’s annual budget, and this is set to rise.

At the April 2013 meeting of the Calderdale CCG Governing Body,  it was noted that Private Finance Initiative payments for Calderdale hospital will be £24 m this year (they increase each year) – almost 10% of the 2013 annual budget of £256m.

Details of the Calderdale Royal Hospital contract are on a PFI list compiled by the Treasury and reported  on by the Guardian in 2012.

The 2012 Guardian report says:

“…details of the contracts compiled by the Treasury make clear that some NHS organisations will end up paying almost 12 times the initial sum over what is usually a 30-year contract.

For example, while the capital cost of rebuilding Calderdale Royal Hospital in Yorkshire is £64.6m, the scheme will end up costing Calderdale and Huddersfield NHS Foundation Trust a total of £773.2m.”

Privatising buildings, nationalising debts 

The Treasury spreadsheet shows the capital cost of the Calderdale Royal Hospital as £64.6m (off the government books), and that the Unitary Charge payment for 2001-2 was £13.8m. (The Treasury spreadsheet is downloadable here: PFI projects in procurement March 2012 (Excel 56KB). Calderdale Hospital data is in row 363 of the spreadsheet.)

The Unitary Charge is an annual PFI fee, for the duration of the “concession period” that lasts until 2032-33. It covers the mortgage payment, costs for services such as car parking, catering & cleaning, and inflation. It goes up each year.

By 2008-9 the Unitary Charge payment had risen to £20.9m. By 2021-22 it will have risen to £29.1m, and by 2030-31, to £36.4m. Unless the government does something sensible.

For instance, like requiring banks that were nationalised in 2008 to stop milking PFI repayments from the NHS. We own those banks, so why should we let them act like vampires sucking the lifeblood of the NHS?

The Guardian also quotes Margaret Hodge MP as saying that PFI

“… privatised the buildings but nationalised the debts. It’s crazy.”

According to Calderdale and Huddersfield NHS Foundation Trust, the Catalyst Healthcare PFI consortium that built Calderdale Royal Hospital was made up at the time of Catalyst Healthcare plus the Lend Lease Corporation, Bovis Lend Lease Limited, ISS Mediclean Limited, the British Linen Bank Limited and the French bank Societe Generale – one of the banks just found guilty of fixing Libor rates.

Calderdale Royal Hospital private equity shares have changed hands 9 times since 2002 – who owns them now?

In 2011, Calderdale Royal Hospital was singled out in a report on the excessive profits generated by selling on PFI/ PPP (Public Private Partnership ) equity. The 2011 Report by Dexter Whitfield found that private equity shares in Calderdale Royal Hospital had been sold on nine times since 2002, the year after the PFI-funded hospital opened.

Because the Treasury PFI database had no record of  Calderdale Royal Hospital secondary equity sales  (the selling-on of private equity from the original investor/s), the Report’s author Dexter Whitfield had to scour company documents to find out that shares in the hospital had changed hands nine times.

The BBC then tried to find out from five of the companies how much profit they had made from selling on the shares in Calderdale Royal Hospital. The companies refused to say, claiming this was commercially confidential information.

Dangers of selling on private equity shares in public projects

Overall, Dexter Whitfield’s 2011 Report found that total sales of UK PFI shares generated £10bn. Average profit was highest in NHS PFI share sales, at 67%. Key findings of his report included:

  • PFI schemes were beyond the auditing powers of the Treasury and the National Audit Office, which had failed to identify the true scale and profitability of PPP/PFI equity transactions
  • increased use of tax havens by PFI “secondary market infrastructure funds”

In a previous, 2010 study, Global Auction of Public Assets, Dexter Whitfield raised the alarm about the damaging effects of the sale of PFI equity and the related growth of “secondary market infrastructure funds”. These include:

  • creaming off operational efficiencies as private profits
  • privatisation of gains from publicly financed investment and development
  • erosion of democratic control
  • increasing secrecy
  • acceleration of marketisation of public services

Terminate the PFI programme

Mr Whitfield’s 2011 Report made a number of recommendations, including the final, killer statement:

“Ultimately, the negative effects of the PPP equity secondary market can only be solved by the termination of the PPP programme combined with new regulatory controls on existing projects.”

[Back to NHS for people not profit – bring back democracy, save A&E]

Posted from here.