PFI deal profit, our loss
14 September, 2017 — By John Gulliver
University College Hospital
THE splendid towering edifice of the University College Hospital in Euston Road – built only a few years ago – draws appreciative glances from passers-by.
But it has been sucking blood from the hospital – roughly in the region of £30million per year.
This is because it was built by a conglomerate, Health Management (UCLH) Plc (HMU) contracted by the hospital under the system much favoured by the New Labour government – the Private Finance Initiative.
The contract committed the NHS Trust to pay an annual charge of £27.9million increasing through the retail price index each year until June 2040. The total fee paid by the Trust for 2015/16 was £38.8million – money withdrawn from the hospital’s threatened budget already teetering on an abyss. So far, Health Management has made more than £180million in pre-tax profits from the deal entered into 12 years ago.
Health Management is made up of Credit Suisse (43.3 per cent), Semperian (40 per cent), Interserve (8.3 per cent) and Dalore Capital (8.3 per cent).
The scandalous financial web stitched together by the PFI deal has been exposed by research carried out by the Centre of Health and Public Interest think tank into PFI schemes across the country.
Colin Leys, author of the report, headed Profiting From Our Infirmaries, said that the profit margin from the contract governing University College London Hospital, is “more than enough” to build an additional hospital and is the result of a system of “highly favourable” contracts.
The report also warns that the UCLH contract was “especially concerning” as there was “exceptionally high rates of profits”. According to the hospital’s board papers the entire scheme is described as a “particularly expensive form of borrowing”.
As for Colin Leys, a respected health policy campaigner, his research reveals a staggering scale of profits extracted from the coffers of the UCLH Trust by the PFI contract – between 2005 and 2015 it paid a total of £724.8million out of which the company, HMU, has made pre-tax profits of £190.4million and post-tax profits of £150.1million.
While profit margins have been falling for many companies in Britain, HMU enjoyed a reversal of this trend. They rose from 4.6 per cent in 2005 to 29.4 per cent in 2015.
Digging further, Mr Leys reveals that during the coming years UCLH will pay the PFI company an extraordinary total of £1.95billion.
His report recommends using public sector loans to buy-out PFI contracts – saving the NHS funding in the long run – and capping the amount of profit a company can make from the schemes. I wonder which government would be brave enough to take this step – a step, I sense, that would draw much public support.
To stir the pot further, Mr Leys adds: “There is a legitimate debate about how much, if any, profit should be generated through contracts to deliver publicly funded healthcare.”