╨╧рб▒с>■  mo■   l                                                                                                                                                                                                                                                                                                                                                                                                                                                ье┴7 Ё┐mLbjbjUU %д7|7|mH      l╪╪╪╪╪╪╪ь╝ ╝ ╝ ╝ ╚ ,ьF╢ ┼ ╟ ╟ ╟ ╟ ╟ ╟ $№ иы ╪ ы Ю ╪╪ Ю Ю Ю :╪ ╪ ┼ Ю ┼ Ю ОЮ , j K╪╪┼ Ї `]D{gы┐ь╨ ╝ : N╡ ┼ 0F╜ ─И ─┼ Ю ьь╪╪╪╪┘Blackburn and District Trades Council PFI and Queens Park Hospital It is widely accepted in the Trade Union movement that there is a pressing need for investment in schools, hospitals and other public services. In our own District there has been a broad consensus for a number of years - except with regards to the question of Accrington Victoria Hospital - that there will be advantages in the creation of a single, modern District Hospital on the Queens Park site. You would think, therefore, that the confirmation of plans to complete this "single hospital project" would be one achievement for which our political leaders could expect to bask in unadulterated public acclaim. Unfortunately, however, their laudable anxiety to deliver major capital projects in the public sector may have led them to be seduced by a procurement strategy which, over time, will make the outcomes seem a good deal less wholesome. Amongst the congratulations there are already voices of suspicion and concern. Developments which should have claimed universal approval are in danger of being seen as a threat. The fly in the ointment is PFI - the "Private Finance Initiative". PFI means that, in the case of Queens Park Hospital for example, the Government (or, contractually, the Hospital Trust) will do a deal with a private company to build the new section of the hospital. It will then pay the company for this over a period of 30 years. It will also transfer some operational matters to this company (in the case of Queens Park, mainly maintenance work) and the annual "PFI Tariff" will include payments for this work. Existing NHS staff in the operational areas affected will be transferred to the employment of the PFI company. The NHS has generally not, of course, built its own hospitals. The normal method is to hire a construction company. So - why should PFI be seen as a problem if the private sector has always been involved in capital schemes anyway? The critics of PFI say that there are five principle criticisms: PFI will cost more in the long term; the basis on which the Government compares it against the "normal method" is tendentious; there will be financial pressures on clinical services driven by the need to meet the PFI Tariffs; the policy of transferring staff to the PFI companies is unfair to the staff themselves, is an attack on terms and conditions in the sector and is the thin end of a privatisation wedge; and the PFI contracts will be vulnerable to poor performance. The estimate given by the Hospital Trust in March 2000 for building the final part of the new Queens Park Hospital is just over г70m. The estimate of the annual PFI Tariff (not counting the "operational" element) is г5.5m. Over 30 years, therefore, (if the estimate is right) the Health Service will end up paying something like г165m (in current price terms) for a г70m project! The PFI Tariff will be paid by the Hospital Trust. Where will the money come from? Part of it will come from "capital charges". These "capital charges" are a component of the NHS financial management system - every Trust has to "pay" them back to the centre out of the income they receive from Health Authorities. Their purpose is, to be charitable, obscure - they are part of the environment created to encourage NHS managers to think "commercially", as if hospital buildings were an investment on which it was necessary to secure a "return". When the final phase of Queens Park is finished the "capital charges" payable by the Hospitals Trust will be adjusted. They will go down because of the Infirmary being closed and up because of new buildings being brought into use. The net effect will be an increase. If the project is delivered by PFI the amount of money which will be added to the "capital charges" to account for the new buildings will be "freed up" - the Trust will not pay it back to the centre but will put it towards the PFI Tariff. This, then, will be the key central Government commitment. Money which would have circulated within the public books will become real money paid out over time to the PFI company. It is an interesting example of how Government now manages its managers. They are presented with a structure which makes PFI seem a "realistic" option as against "capital charges". As citizens, though, we are entitled to take a broader view. We estimate that of the г165m paid in PFI Tariffs for Queens Park over 30 years г110m will be diverted "capital charges". If we subtract from this sum the entire г70m that would be spent on a Public Sector project it still leaves an additional cost of over г1m per year. We can see that the diverted "capital charges" will not pay for all of the PFI Tariff, and we will look subsequently at where the rest of the money will come from. First of all, however, we want to try to understand how the Government can see the above comparison of costs as "value for money". Their "better value" argument relates to an accounting technique. It is known as the "Net Present Value" (NPV) method. NPV is usually applied to try to get an estimate of potential cash-flows, in and out and over time, when comparing different investment options. In the PFI context it is used to explore the idea that it can be an advantage to spend more in small bits over a long period than less in big bits in a shorter time (the spending for a Public Sector project all coming at the time the hospital is built). The further into the future money is spent the more it is "discounted" - so, for example, a г1 spent in, say, 2010 might be held to be equivalent to a value now of 50p. The further ahead the spend the bigger the discount. The outcome of any NPV analysis is, of course, highly dependent on including all the right variables and on the assumptions made about these. Trusts have to work here within parameters set by the Treasury, and PFI critics have criticised the Treasury for setting the assumptions at levels designed to give the answers required - so that the exercise becomes, at best, one of self-delusion. In the Report on the Carlisle PFI scheme commissioned by UNISON from David Price, Declan Gaffney and Allyson Pollock it was argued, for instance, that the whole "better value" argument would flip on its head if the discount rate used was reduced from 6% to 5.5%. In the case of the Queens Park project, the sense of the NPV comparison is made even more difficult to follow by the fact that the Annex of the "Outline Business Case" (a central document in the PFI process) to which we are referred for "the full economic appraisal" shows that different Tables have been used for the comparison of the Public Sector project against an imagined PFI scheme. What is clear, even so, is that the NPV analysis only switches in favour of PFI when it is given a further tweak by what it is tempting to see as another piece of accountancy legerdemain. An amount is added to the Public Sector project to account for "risk" "transferred" to the PFI company by a PFI scheme. In other words, there might be unforeseen costs which a company working to a contract price might have to absorb but which would be "passed on" to the NHS under a Public sector Scheme. Strangely, the "Outline Business Case" itself points out (section 5.6.2) that the Hospitals Trust "has an excellent record of delivering capital schemes to budget and managing risk". Even if one accepts that some "risks" will actually materialise and actually be "transferred" to the PFI company (rather than agreements being re-negotiated in the light of "circumstances") the amount it is reasonable to predict must surely be less than the 12% used - particularly when the costing for the Public Sector project already contain a "risk" element (the "Capital Costs" summary given as Appendix A of the "Strategic Outline Case" has a "Planning Contingency" line of 11% of some of the other elements). Frankly, we have very little confidence that the NPV exercise is telling us anything at all worthwhile about the merits of PFI. Before wandering into the picturesque back streets of NPV we were at the point where it was clear that only a proportion of the money to pay a PFI Tariff for Queens Park will come direct from the centre in the form of diverted "capital charges". It is envisaged that there will be other movements in the Hospital Trust's budgets which will provide the money to make up the rest of the PFI Tariff. On the one hand, the Trust is scheduled to see an increase in the revenue money it gets from the Health Authority as part of a long-standing plan to re-distribute NHS resources and make them a better match to local populations. On the other hand, the Queens Park project is itself expected to generate "savings" which will contribute to the PFI Tariff. We imagine that the Government would object to the idea that these savings should be looked at as a feature of PFI on the grounds that they would be anticipated however the project is delivered. We are not so sure it works like that. We think that NHS managers are expected to be "realistic" enough to recognise that PFI is the game they have to play and they are encouraged to feel that they have to "win" support for capital projects by demonstrating that there will be sufficient "savings" to contribute to a PFI Tariff. In the Queens Park example there is clearly a lot of sense in the expectation that a single site will lead to some efficiency gains and to a reduction in features such as the movement of patients by ambulance between the sites. The Trades Council, however, has already expressed to the East Lancashire Health Authority its concerns about the bed numbers envisaged for the "single" Queens Park site, and about how a portion of the anticipated savings are expected to relate to "reductions in in-patient beds". The scheme has an end result of reducing the total number of beds by 37. Behind this total there is movement up as well as down in particular categories. The main losses occur in General Surgery (-18), Orthopaedics (-6) and Obstetrics (-7). There is also a reduction of 13 beds achieved by the integration of Paediatric Surgery and Paediatric Medicine into a single Children's Unit. The 1999 "Consultation Document" "The Closure of BRI and the relocation of services to QPH" seems (para 7.1.7) to suggest that in order to achieve this bed reduction "performance" will need to match "the current performance of the "best" performing Trusts in each speciality on the database". We are not entirely clear what is meant by "performance". Our assumption is that it is a euphemism for "throughput" - the number of patients you can process per bed in a given time span. We are very worried by the measure used to argue the feasibility of the bed reduction. Our population is one weakened by poverty and unhealthy living and working conditions. To expect "performance" in an area like ours to match that in more prosperous areas seems to fly in the face of what is known about the relationship between such indicators and the deprivation of local populations. It seems particularly strange to adopt "tight" bed targets at the very time when the NHS - through the national bed review - is beginning to accept the argument that bed cuts, made previously in the name of "performance", have gone too far. Where the "Consultation Document" says that the "reductions in in-patient beds" will be a key source of savings our suspicious minds can't help but feel that one could substitute the words "reductions in staff" without loosing the practical meaning. Bed numbers should not, however, be treated as having a straightforward link to staff levels - the number and intensity of clinical interventions is just as important. We would feel far happier with an assurance that future staffing levels will be based on genuine, convincing and agreed "fit for purpose" assessments of need - rather than the potentially procrustean presumption that less beds means we can save on staff. Some NHS staff are already on notice that they have been lined up to become victims of PFI - those who will be "transferred" to the PFI company as part of the deal. The original plan for Queens Park had been to seek two "bids" in this respect from each potential PFI contractor - one for the "maintenance" of the new buildings plus Portering, Catering and Domestic services and some smaller elements like "Grounds Maintenance", and one just for the "maintenance" of the new building. Eventually, the Porters, Kitchen Staff and Domestics were taken out of the equation - but the "maintenance" side has been expanded to include the whole of the Trust. The ancillary staff taken out of the project are obviously relieved. The works staff pitched in at the last minute must feel a deep sense of betrayal. Whilst the transfer of staff will be covered by TUPE, and whilst there are some new measures supposed to ensure that the PFI company will provide transferred staff with a "broadly comparable" pension scheme, the Trade Union movement has sufficient experience of TUPE to know that its practical consequences can be mixed. The prospect of a transfer is at best unsettling and at worst a threat to living standards. Why has PFI been associated with staff transfers? The Department of Health website has a "Question and Answer" section on "PFI and Capital" in which one of the Questions is "Why do some non-clinical support staff have to transfer to the private sector partner under PFI deals?". The answer given is that "Under PFI the NHS does not procure an asset; it purchases a fully-maintained facility. The private sector takes on a significant amount of the risk associated with a PFI scheme since it will loose money if it does not provide the hospital and ensure that the agreed quality standards are met. These standards will cover every aspect of the property-related services provided by the private contractor eg. property and building maintenance". This answer is a bit like explaining that you shot someone because you pulled the trigger on the gun. It addresses the superficial aspect whilst ignoring the real issue - which is why this sort of long-term involvement has been made part of the procurement process at all. Our belief is that there are three real motives behind this feature of PFI. The first is presentational. It is precisely to enable the answer on the Department of Health website to be given, so that there is an apparent justification for the long PFI Tariff period. PFI can, in this way, be marketed as something more than just a "buy now, pay later" capital scheme. The question, "would it not be cheaper even just to "borrow and build"?" is evaded. The second is ideological. PFI is a means of habituating the public to the idea that it is acceptable to have a private company responsible for running the NHS - if, initially, just in part. It is, in other words, the advance column of wider privatisation. The third is related to Industrial Relations - and this may, indeed, be seen as the real prize. Whilst staff transferred to a PFI company will take with them their NHS Terms and Conditions and be given a "comparable" pension the PFI company will not be constrained to offer such terms to any new employees taken on over the life of the contract. PFI - like other forms of privatisation - is a quite deliberate assault upon national terms and conditions of service - and upon the Trade Union recognition associated with these - in the public sector. It is bred from the same seed as the efforts made to effect local conditions and de-recognition within the Service. Will PFI at least "work" so far as the day-to-day running of Queens Park is concerned? In theory, one would not expect it to be any better or worse than privatisation elsewhere in the NHS - which is not a particularly reassuring thought to anyone who has, for instance, listened at a UNISON conference to what those who work in the Service have to say about private sector's reputation. What is particularly disturbing about PFI is that the more it cuts into existing NHS capacity the more vulnerable will the host Trusts become to poor performance. There is also a concern about how flexible the arrangements will prove over time. And, indeed, about what happens should a PFI company go "bust". Then, at the end of the day, "what is expected to be the status of the assets built after the contract period?". This is the precise question the Trades Council asked Project Manager Simon Neville in August 1999. His answer was - "There are a number of possibilities for the asset at the end of the contract period. It could revert to NHS ownership, there could be a further contract period or the asset may no longer be required by the NHS, and it would be left to the private sector to determine its future. I think this latter instance is most unlikely". So, unless we have misunderstood this, the NHS will not have absolute rights over the last built part of the Queens Park site when the 30 years are up - and there may be further, as yet unspecified, costs to either securing the buildings outright or in continuing to have a use of them. The Labour Party said in its election manifesto prior to the last General election that it would find a new relationship for the public and private sector parts of PFI. The scheme seems to us, however, to have remained very much as it was designed by the Conservatives in respect of their respective roles and obligations. Labour's achievement has been to curb the feeding frenzy with which the private sector greeted PFI and which threatened to collapse the whole enterprise in confusion and recriminations. It has made some improvements to the terms of the staff transfer element, and reduced the degree of prescription associated with it, without taking it out of the picture altogether. It has been a particular disappointment that the Government has stuck with its affection for PFI even as the criticism of it has mounted. Whilst PFI may not often feature openly as a cause of complaint it is undoubtedly one of the ills sapping the strength of those areas to which the Labour Party would look to maintain its morale in the face of the resurgence of Conservatism. It is as if it has decided to abolish its immune system and to live without vitamins. 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