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Thursday, 8 November, 2001, 15:12 GMT
Public bill for PFI hospitals
Cumberland Infirmary
Cumberland Infirmary was built under the PFI
The government has defended using millions of pounds of taxpayers' money to build hospitals using private sector investment.

The aim of the Private Finance Iniatitive is to build NHS hospitals using funds from the private sector.


As PFI becomes more common these costs are being driven down

Department of Health
But it has been revealed that the first 15 schemes launched since the 1997 general election have so far cost the taxpayer a total of 27m.

The cash has been spent on hiring financial advisers and lawyers to work on the detail of the schemes.

A Department of Health spokesman said the figure was now falling by about a third as PFI - under which private sector investment in state hospitals is paid off by the government - became more efficient.

He said the 27 million was just 2.2% of the total cost of the building of the hospitals.

"As PFI becomes more common these costs are being driven down.

"You need financial and legal advice whether a project is funded by PFI or publicly funded and it has always been around 2% of the total cost of the budget.

Standardised

"We have now standardised the PFI procurement procedure with the specific aim of reducing costs and we were spending that much because it had not been done before."

He said the NHS was now regarded as one of the most efficient buyers of financial and legal services.

In England, there are currently 64 major PFI developments, with 18 built and several others in the pipeline.

The first PFI project - Dartford and Gravesham hospital - cost 2.25m in legal and financial advice, compared with a similarly sized project in Dudley in the West Midlands, built this year, where the costs came to just 1.2 m, he said.

Last month a union leader accused the Government of using PFI to "fudge the figures" on public service investment.

GMB general secretary John Edmonds said PFI had led to "dire" results and poor value for money.

Stop defence

Dave Prentis, general secretary of public sector union Unison, said: "It is time for the government to stop defending PFI and see it for the discredited system that it is.

"PFI is not value for money, it is fundamentally an expensive option because the private sector borrows at higher rates than the public sector and their profits have to be paid for.

"PFI uses 25-year contracts and multiple services, making their contracts extremely complex, leaving the door open for more advisers to take their cut.

"The government has admitted that the claimed savings from PFI have fallen to just 1.75% which means that they are so low that they could vanish with today's change in interest rates.

"The arguments for PFI have run dry - it's time to scrap it."

See also:

23 Oct 01 | Health
PFI hospitals design 'disaster'
30 Jul 01 | Health
Failings at first PFI hospital
03 Sep 01 | ppp
Is PFI a good deal?
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