Union Chiefs Condemn PFI Madness

23rd July 2001
The largest Union in Scotland today said that staff morale at Hairmyres hospital in Lanarkshire was at an all time low, and that the haemorrhage of staff from the NHS was accelerating. The Private Finance Initiative (PFI) has failed to deliver, they added. They say that the costs will be higher as the consortium involved have to also deliver profits to their shareholders.

Hairmyres Hospital opened in March this year, and has been plagued with difficulties since then. Recently, sewage seeped onto the floor of a ward. Now staff at the hospital are claiming that conditions are cramped, and that this is resulting in staff looking for employment elsewhere.

Hospital Trust managers have been quick to defend Hairmyres, pointing to the fact that in the old hospital patients frequently had to be transported by van to have X-rays. A consultant at the hospital said that although the ancillary staff such as the porters are now employed by a private company, they are the same people doing the same job.

Jim Devine of Unison also pointed to the example of the old hospital. He made the point that before the new hospital was built, the public could find out whether money was being spent effectively. Now, under PFI, the companies involved can hide behind 'Commercial Confidentiality'.

Bill Spiers General Secretary of the Scottish Trade Unions Council (STUC) added that although some of the porters employed at the moment were the same people as did the job before for the same pay and conditions, this was only true of those who transferred across from the old hospital. New starts would be employed with different (i.e. lower) pay rates and with fewer rights to demand fair conditions.

The Scottish Socialist Party are vehemently opposed to PFI and its close relative PPP (Public private Partnership) and believe that the methods used by Government to compare the figures for the construction of new projects are weighted in favour of the private sector. The cost of using public money now rather than borrowing from the private sector and repaying over a longer period is calculated and a discount applied to the cost of borrowing from private finances which at the moment amounts to 6% per year it is borrowed. This allegedly tomake up for the interest that would be lost over that time were the money to be spent now.

By this jiggery-pokery borrowing £1000 and paying it back in instalments of £100 per year is held to be equivalent to spending £736.02 now. An apparent saving of £236.98 in real seasonally adjusted terms.

I hasten to add that this 6% is a purely arbitrary figure, and that if this discount is reduced by even 0.5% the cost per year of funding the projects publicly is as efficient if not more so!

Part of the comparison includes taking into account the 'Risk' involved in funding the project publicly. But the system used to calculate the transfer of risk onto the private company is again weighted against the public sector. (And let's face it, the 6% discount is already taking account of the risk of paying for the project using public money.) Basically a lump sum is added to the cost of building with public money to take account of unforeseen expenses which are transferred onto the private company.

This overlooks one very important fact which arises from our experience of the Government's attitude and approach to private firms. Whenever private companies providing public services are short of cash, the Government bails them out with money from the public purse, just like when Railtrack received £100 million so that they could pay their shareholders a dividend.

If the case for using public funds for the public good was not impeded enough, there is yet another burning bridge to cross, namely taking into account construction period risks. Estimates of the burden on publicly financed projects over-running or going over budget are based on historical claims about the cost of public sector project cost over-runs.

One of the projects that will undoubtedly feature in this equation is the Scottish Parliament building in Edinburgh. Public funds have been used, and the 2001 estimated cost of completion is now nearly four times the original cost with the Scottish Parliament agreeing that no ceiling be placed on the final cost. This will probably mean that publicly financed projects will be estimated out of the market for the next millennium!

Did someone say "CONSPIRACY" ?