Richard Hurley: Private financing of hospitals

Richard HurleyDoctors should demand publication of the details of deals made between the UK government and private investors to build hospitals under private finance initiatives (PFIs), Professor Allyson Pollock told a meeting of the Medical Journalists’ Association at the Royal College of General Practitioners on 3 June.

She showed new evidence that these schemes are more expensive than direct government borrowing: “Why aren’t we renegotiating these contracts?” she asked. The chair, Professor Sir Anthony Newman Taylor, introduced her as “the most cogent and consistent critic of the internal market in the NHS.”

Private financing contracts are secret because of commercial confidentiality, but some of those in Scotland are in the public domain after use of the Freedom of Information Act. Economists found massive profits for some investors—for example, equity of just £100 invested in NHS Lanarkshire’s Hairmyres Hospital is projected to yield dividends of almost £90m over the 30 year term of the lease (an astronomical return of some 900000%).

“The NHS is being broken and privatised,” Pollock said. She is director of the centre for international public health policy at the University of Edinburgh and author of the book NHS plc. In her talk, entitled “Privatisation of the NHS: opportunities and pitfalls,” she presented a framework for how this has been happening at every level.

Under private finance initiatives for-profit organisations design, build, and operate facilities such as hospitals, roads, and schools on what has often been public land. They then lease these back to the government under 20-30 year contracts. This represents a huge transfer of what would otherwise have been public owned infrastructure into private ownership. “Instead of passing on a legacy, we pass on a legacy of debt,” said Pollock.

The attraction to government, she explained, is that PFIs have enabled the direct funding of infrastructure to be removed from balance sheets, in line with the World Bank’s free market agenda. And she dismissed arguments that the private sector is inherently more efficient than the public sector, claiming that no evidence supports this hypothesis.

Since 1997 £63bn has been raised through PFIs in the United Kingdom, but the repayments, extending to 2046, will total £273bn. These schemes may cost the taxpayer 2-3% more than public borrowing would have. “We’re paying too much,” Pollock said. Compounding this, she continued, banks such as the Royal Bank of Scotland that are now owned by the taxpayer are being paid at exorbitant rates.

PFI costs healthcare trusts more: Hereford Hospitals paid 3.8% of its operating revenue in capital charges for land and buildings before 1991; since entering a public-private partnership the annual amount paid has risen to 14.6%. The redundancies threatened in the NHS as a result of the recession are particularly sad, Pollock said, given the cost pressures in servicing PFI debt.

Pollock described the “four pillars of privatisation”—the purchaser-provider split, service unbundling, de-professionalisation, and market entry. Recent reforms of the NHS, such as commissioning by general practitioners, payment by results, new consultants’ contracts, and the NHS Plan, represent the scale of the initiatives behind privatisation of the NHS. And she also showed how one independent sector treatment centre in Scotland treated far fewer patients than it had contracted for.

Education and health together, typically worth some fifth of a country’s gross domestic product, represent a “great unopened oyster for multinationals,” Pollock said. US foreign policy is driving the trend to create commercial opportunities in all health and social care facilities worldwide, and the concept of public-private partnerships, already widespread in Europe, is being exported to other countries. Pollock was particularly critical of the trend to export public-private partnerships and health system privatisation to Africa because value for money is not shown, and she is concerned about the debt implications for countries that are already heavily in debt.

Wales and Scotland have begun to move away from PFIs and markets in health care. But Pollock thinks that the rhetoric of the new Conservative-Liberal coalition indicates that opening the NHS to markets in healthcare will continue to be a key policy in England.

Read Allyson Pollock’s blog at

This blog was first published in the newsletter of the Medical Journalists Association.

Richard Hurley is assistant magazine editor, BMJ