Private Finance Initiative

Lord Johnson of Marylebone Excerpts

Thursday 23rd June 2011 Westminster Hall

[Jesse Norman]

That is an extremely interesting suggestion. I am not sure how the details would work, but I will make specific proposals for improvement to public procurement later on in my speech. I thank my hon. Friend for his intervention.

Like many colleagues, I first understood the impact of the private finance initiative through my local hospital. Starting in 1999, Hereford hospital was one of the earliest PFI projects. It was built and is currently owned and managed under a 30-year contract through a special purpose company, which is three-quarters owned by Semperian, a large PFI firm based in the City of London, and one-quarter owned by the French industrial services giant, Sodexo. Non-clinical services are contracted out to Sodexo, WS Atkins and to others.

Car parking charges at the hospital have been the source of huge local anger because they penalise patients at a very vulnerable time in their lives. They particularly hit frequent users such as those visiting in-patients and those suffering from cancer. They are socially regressive, falling relatively harder on the poor than on the rich. As I investigated further, I found that that was only the tip of the iceberg. The reason why the charges were so high was down to the PFI itself, because car parking was contracted out not once but twice—first to Sodexo and then to CP Plus, and each had its own mark-up.

[Joseph Johnson (Orpington) (Con)]

Is my hon. Friend aware that fewer than a quarter of England’s 168 NHS hospital trusts have significant PFI hospitals within them, but that those trusts account for almost two-thirds of A and E closures or proposed closures? I know from my own observation of the South London Healthcare NHS Trust how extreme the operational constraints are that face managers who have PFI hospitals within their trusts and how those hospitals force them to take decisions on operational grounds that might not be in the best interests of patients.

[Jesse Norman]

It seems to be true that many decisions were made from a desire to fit the financial cloth to the pocket rather than from the actual clinical needs of the patients. It is certainly true that the squeeze that these inflation-adjusted costs exert on hospitals is heavily responsible for the closure of A and E units.

Let me return now to the situation at Hereford hospital. Later PFI contracts have contained financial safeguards for the NHS, including automatic efficiency savings of 3% a year and the right for a hospital to put services out to public tender periodically. However, the Hereford contract contains neither of those safeguards. There are no automatic efficiency savings, and the contract cannot be retendered until 2029. The hospital trust is doing a valiant job, but it has little influence, legal scope or access to underlying costs which might help it to negotiate changes to the contract. Worse still, no mechanism exists by which the hospital can group together with other PFI hospitals to exercise collective influence over the PFI contractors. By contrast, Semperian has 106 PFI contracts. The imbalance in power is obvious, yet the NHS seems to have done nothing to remedy that.

For almost a year now, I have been campaigning for a voluntary rebate for taxpayers on the PFI of £500 million to £1 billion. Those are large numbers, but that goal is not unrealistic.