In principle, there is nothing wrong with the Government using its credit worthiness to borrow money in a different way from normal general borrowing and to ally the sums raised to a particular capital asset and  / or the means of getting that asset built. (A form of mortgage from the builder – who in turn has to acquire the loan etc).
However, most of our Private Finance Initiative schemes in the NHS have gone further than this.
1. The economic case for many has been deliberately manipulated to show that traditional government procurement isn’t better value (I know this from first hand experience). This is partly because Government pretends that Private Finance Initiative is off balance sheet and traditional spend is on. This is a fiction.
2. Private Finance Initiative schemes only work financially if both the builder and the lender make a profit, have the option of selling on their stake soon after completion, and can tie in others (such as catering and cleaning firms) who in turn make a profit o that part. This isn’t achieved by magical “whiz” ideas (if it was we could just pay the whiz kids to tell us stupid managers how to do it); it’s done by reducing the cost of labour (lower ages and benefits, temporary contracts,transient labour, minimum staffing levels etc).
3.This only works where you build new. So, better, cheaper, refurbishment options are rejected for costly  30 year deals – at a time when the care services are fast moving and have a ten year horizon – and these build in a rigidity to the supply side that is then managed by culling perfectly good, but expendable traditional services.
The Private Finance Initiative is there to serve the needs of big business and big finance. If it is the answer, would someone please tell me what the  question is?
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4 Comments

  1. Jos Bell says:

    The only question is the hindsight question : can badly designed PFI deals be re-worked to safeguard the services they were built to contain? Is there a point in law which can be deployed?

  2. George Nieman says:

    The way this government is handling this situation is obviously to bring in more private service suppliers. This in turn will lead to patients being referred to these suppliers which will bring about the closure of some NHS departments. As time goes on this government will declare that the NHS is being run far better in private hands and declare that the NHS is no longer a viable service. From then on we shall have to pay for this service,

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