A2 Micro: The True Costs of PFI - the Lewisham Hospital Precedent

If there are any stories out there of successful PFI/PF2 projects, then they are very well hidden. I have blogged about the latest Tory version of Labour’s PFI, PF2 recently and looked at the ballooning repayment costs over time to the taxpayer of such projects. PFI uses private money for major public sector capital projects. The private company builds and owns the facility, which is then leased back to the state, in exchange for regular repayments. It was initiated in the UK by John Major's government in 1992 - but was expanded under Labour after 1997 and now continues under the stewardship of George Osbourne’s Treasury. According to the Guardian’s Datablog such projects now amount to “£301,343,154,097. That is the total that the UK's public sector will pay in existing Private Finance Initiative repayments.”

The reason why successive governments have found it difficult to resist the seductive pull of PFI, though often outspoken critics in opposition, is that it means they can embark on expensive infrastructure projects spreading the costs over 30 years - more schools, hospitals, roads, bridges today all paid for by future generations of taxpayers. Great! Well, not when the contracts, in the government’s eagerness to attract the private sector, are heavily weighted in favour of the private investors. I first heard about the Save Lewisham Hospital campaign on Facebook and it seems to have grown exponentially over the last few weeks. There was a protest organised at the Question Time recording two weeks ago and there is a growing list of names on a petition adding gravitas to their cause. In short, closing down Lewisham Hospital, both successful and solvent, will hopefully encourage people to use the heavily indebted South London Healthcare Trust, adding to their income and keep it afloat. The bare facts are laid out in comic strip format below and found here. Aside from the legal concerns, there are worries that this will set a precedent and if it works, will be repeated in other areas of the country. Seems to me like it could be a classic example of government failure.

More news articles on PFI here.