By Lucy Phillips
25 November 2010
Health chiefs have come under fire from MPs for failing to negotiate savings in Private Finance Initiative contracts, forcing hospitals to cut frontline staff.
Peter Coates, director of capital and investments at the Department of Health, was questioned by the Public Accounts Committee yesterday. MPs were concerned that PFI contract costs remained high, and savings enjoyed by the private sector were not being passed on to the taxpayer.
Labour MP Austin Mitchell accused the DoH of failing to use its leverage to drive down expensive PFI maintenance contracts, which hospitals were sometimes tied into for up to 30 years and many trusts were dissatisfied with.
‘Hospital porters, surgeons and other staff are being laid off because you can’t get money out of the PFI contracts which is causing the problem in the first place. And you are giving them no help,’ he said.
In response, Coates said the department would support attempts by hospitals to reduce their maintenance contract costs but was sceptical whether this would be possible. Despite only having a team of four people he felt there was ‘proportionate’ support at the centre since individual trusts had their own staff responsible for the contracts.
Coates added that ‘value from economies of scale is something that goes internally round the NHS’, with PFI providers passing on cheaper project costs depending on the market at the time.
He also revealed that in 1999/2000 the then Labour health secretary Alan Milburn told him that the PFI was ‘the only game in town’, despite the fact that in some cases it was shown to be more expensive than regular public sector procurement.
The committee also questioned Sir Bob Kerslake, the new permanent secretary of the Department for Communities and Local Government, on PFI in housing. In June, the National Audit Office criticised the DCLG for its lack of capability in managing PFI contracts, leading to costly delays.
Kerslake admitted that the PFI housing programme had been a ‘learning exercise’ but reassured the MPs that the department was now on top of the situation. Central capacity had been boosted and data improved, enabling the department to make cost comparisons between PFI and non-PFI projects.
The PFI worked best on ‘big transformation projects’ rather than straightforward housing refurbishment, he said.
He added: ‘For us, the PFI was not the only game in town, it was one tool in the toolkit and we think it’s worth keeping that tool where the circumstances provide.’
