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Friday, 17 May, 2002, 09:07 GMT 10:07 UK
PFI hospitals 'cost NHS more'
Royal Infirmary of Edinburgh
Edinburgh's Royal Infirmary was built with PFI funds
Doctors have hit out at the government's policy of using private money to build NHS hospitals.

In an article in the British Medical Journal, Professor Allyson Pollack and colleagues at University College London dismissed government claims its private finance initiative (PFI) provides value for money.

The doctors said the NHS pays twice as much for the new hospitals than it would if they had been built using taxpayers' money.

PFI is helping us deliver the biggest hospital building programme in the history of the NHS

Department of Health spokesman
But many of the study findings were rejected by the Commons health committee in a report published earlier this week.

Ministers are committed to using PFI to fund at least 42 new hospitals over the next few years.

They maintain the scheme provides value for money and is the best way of meeting the costs of the hospital building programme.

Professor Pollack, who is based at UCL's Health Policy and Health Services Research Unit, suggested the formula used by the government to assess the economic value of PFIs was flawed and had not been properly evaluated.


Researchers analysed the costs of three PFI schemes in North Durham, Carlisle and Worcester.

They found that even the apparently basic task of raising the money to pay for the new hospitals through PFI substantially increased costs.

Our best estimates are that the costs of private finance are higher

Professor Allyson Pollack, UCL
They concluded that a variety of costs incurred by developers - comprising higher interest rates for public sector borrowing and fees associated with preparing a bid and carrying out negotiations - accounted for 39% of the total bill.

Similarly, the amount of money NHS trusts had to pay annually towards the capital costs of the new hospital was more than three times more expensive than if the project had been built using public money.

The authors also rejected the government's claim that PFI provides better value for money because it transfers responsibility for risk to the private sector.

They suggested this was simply a way of "disguising the true costs of PFI".

The researchers were denied access to government documents comparing the cost of PFI schemes to those built with public funds.

But the authors said they believed that costs of PFI are significantly higher.

They said: "Our best estimates are that the costs of private finance are higher and that trusts pay much more than they would if the new buildings had been publicly funded.

"The value for money analysis seems to be no more than a mechanism that has been created to make the case for using private finance.

"It raises serious questions about why the government is using an unevaluated method of procurement for critically important services."


In its report the Commons health committee said there was no evidence to suggest that PFI hospitals cost the NHS more.

It stated: "We recognise that there are potential problems with PFI, but we also can see its potential benefits.

"At the very least a benefit could be getting more NHS services now, for a cost over the lifetime of a project, should none of the risks come to fruition."

A Department of Health spokesman backed up the committee's conclusion.

He said: "PFI is helping us deliver the biggest hospital building programme in the history of the NHS. This is good for patients and good for staff.

"PFI projects only go ahead where it is demonstrated through a full business case that they deliver best value for money. PFI's ability to do so has been supported by a series of NAO reports."

Good value

A spokesman for the Office of Government Commerce which overseas procurement and PFI contracts on behalf of the Treasury said the scheme was good value for money.

He added: "PFI is used where private sector expertise can provide value for money facilities and services.

"Also it means when time and costs overrun the contractor not the taxpayer picks up the tab."

But Unison, the country's largest health union, called on the government to abandon the "discredited PFI gamble".

"In the face of this damning proof that the PFI costs us nearly twice as much as it would cost through public funding, the government should ditch this discredited gamble now," said general secretary Dave Prentis.

"The evidence is overwhelming and it would be political suicide to ignore it."

See also:

23 Apr 02 | Health
Nurses highlight PFI pitfalls
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