Select Committee on Health Appendices to the Minutes of Evidence


Memorandum by the Oxfordshire PFI Alert Group (PS 20)


  1.  Background: In March 2000, the then Chairman of Oxfordshire CHC drew together a committee of representatives of diverse health and community organisations, including the local branches of the BMA, the RCN, the NHS Consultants' Association, the CHC and health trade unions, to organise a conference to debate the use of PFI in the provision of new hospitals and facilities in the NHS. The Treasury replied to 23 questions raised at the conference. That document (Appendix 2) was studied.[6]

  The group of organisations, joined by the Oxfordshire Pensioners' Action Group, now formed themselves into the Oxfordshire PFI Alert Group. A questionnaire on PFI issues was sent to Oxford candidates in the General Election (Appendix 1).

  2.  Our response to the Government's defence of PFI: Some aspects of the use of PFI we find most trouble members of our organisations, and the public, are dealt with in section 2 of our submission—the government case for "value for money", annual repayment to the Consortia as first charge on a Trust's expenditure, and the right of the private firms to sell out to others, including overseas interests.

  3.  The transfer of staff from the NHS to employment and control by the private firms in the Consortia is discussed, including the difficulties and objections to change of employer and the conflict of objectives between the public and private sector. (see Appendices 3 and 4 for examples).

  4.  Problems encountered in the Public Consultation process: inadequate information provided for the public, the restrictions of commercial confidentiality, how public views and input are ignored, are presented in this section. The possible effects on the huge voluntary contribution to our hospitals, and the threatened abolition of Community Health Councils, with their important role in monitoring changes in health provision, are regretted.


  After lengthy study, the Oxfordshire PFI Alert Group considers that the Government should return to direct public funding for the construction of new NHS hospitals and other capital projects, ending use of PFI.


  1.1  During the year 2000 representatives of seven mostly health related organisations—the Oxfordshire branches of the British Medical Association, the Royal College of Nursing, the Community Health Council, the NHS Consultants' Association, UNISON (health), the Manufacturing, Science and Finance Union and the Oxford and District Trades Union Council—came together to organise a debate on the use of the Private Finance Initiative (PFI) for the provision of new NHS hospitals and other facilities. The conference was held in September 2000 and attended by NHS staff and the public. Unfortunately the Rt. Hon Andrew Smith, Chief Secretary to the Treasury, who is also MP for Oxford East, had to cancel his attendance. Four months later he sent us a document from the Treasury responding to 23 questions about PFI raised at the Oxford meeting.

  1.2  The conference organising committee studied the Treasury document and other relevant papers and reports about PFI. They drafted a questionnaire covering aspects of PFI which they found greatly troubled the public and NHS staff. Some of these issues are discussed below.

  1.3  The committee of seven organisations, now joined by an eighth, the Oxfordshire Pensioners' Action Group, established the OXFORDSHIRE PFI ALERT GROUP. It sent the questionnaire (see Appendix 1) to all the candidates in the Oxford East and Oxford West & Abingdon Parliamentary constituencies as the General Election approached. Of the candidates who replied, seven were wholly opposed to PFI or (in two cases) opposed to the transfer of any NHS staff to PFI controlled employment. Andrew Smith (Labour) simply replied by once more sending the Treasury document with its 23 replies to our committee, while the other Labour candidate claimed PFI would only be used "where it delivers better value than direct public funding" and "Labour has removed the automatic transfer of hospital staff to the private sector".


  2.1  "PFI is only used where it is better value for money". Those defending PFI never explained how this is measured, nor is it illustrated by comparisons. We have learned that Trusts have been given the message by the Secretary of State, Alan Milburn, that it is "PFI or bust". This was clearly stated to the Chairman of our committee at a Board meeting of a local Trust. It appears the public sector bid has to be "reworked" and presented so that the private sector bid is favoured. (see also Birmingham letter 1 (i) attached).

  2.2  "PFI commitments are a first charge on revenue income". (Quote from para. 7 Treasury document see Appendix 2). People are very shocked to learn that, for at least 30 years, the first financial responsibility of a Trust will be the annual "mortgage" repayment to the consortium. Patient needs will be lower down the list of priorities for the Trust's revenue expenditure. Traditionally in the NHS Capital and Revenue have been separated, but under PFI, the annual mortgage or rent causes what were formerly "capital costs" to become "revenue" (running costs). With PFI payments the priority, grave shortages will occur. In the years when Britain's NHS funding should be catching up with other European countries, advances in technology and treatments, and increases in the elderly population will all add greatly to NHS expenditure.

  2.3  Transfer of ownership or control. After 12 months original consortium partners may change and overseas firms take over. This raises additional problems of accountability to staff, patients and the local community. The Treasury document says:- "General restrictions on the transfer of ownership or control to overseas interests would be contrary to our international obligations (including EU and domestic law) on the freedom of investment and free movement of capital" (Appendix 2: Para 15).

  2.3.1  "Private enterprise is more efficient than the Public Sector." Andrew Smith tells us this is so. However the recent history of firms such as Marconi, Vauxhall, Marks & Spencer shows that the private sector can falter, reduce capacity, and may merge, collapse, sell out or move overseas. (See Appendix 3 for an account of the privatising of the Oxford Regional Health Authority Payroll Offices).

  2.3.2  The market introduces instability to our most vital public services. This leads to Government paying huge subsidies as in the case of Railtrack, which , in the end, will have to be recovered from future taxpayers—our children and grandchildren.


  3.1  Our observation is that it is still the practice to transfer support staff (non-clinical employees) to the private consortium employer when the project becomes operational. At Dudley, NHS workers resisted this transfer for over ten months and received support from organisations worldwide. Pay and conditions are still not adequately protected even where "Transfer of Undertakings: Protection of Employment" (TUPE) legislation is applicable—and which in any case only applies to existing staff. The recruitment and retention of hospital staff is already a problem. Insecure employment conditions can only make this worse. Repeated changes of ownership will exacerbate this situation. For example salvage collectors in Brighton have seen their private employment change hands several times and pensions have not been safeguarded. During 30 years most staff will have changed in PFI hospitals or community premises with a PFI consortium in charge and TUPE conditions will not be applicable to new staff.

  3.2  Threat to Clinical Staff. Government spokespeople have admitted that clinical staff (doctors and nurses) could be employed by private firms, particularly in the new units planned for elective (non-emergency) surgery). The MSF union is strongly resisting Pathology Laboratory staff, who are employed in all health authorities, being transferred to the private sector.

  3.3  Secondment of non-clinical staff to the private sector? Andrew Smith MP reports a proposal that non-clinical staff could remain NHS employees but be seconded to the private sector (presumably to be managed by consortia firms). How such a complex scheme would work out is perplexing. Private employers are opposing the idea. Since wages are the biggest cost to the companies in running a PFI hospital, the control of wages and conditions is of prime importance to these employers. Reducing these costs has a direct bearing on the maintenance of profit for shareholders—the priority of PFI companies.

  3.4  Conflict between public and private companies. The experiences of a mature student employed as a cleaner in an Oxford hospital (Appendix 4) highlights other ways in which economies are made—in this case she was instructed by a ward sister to sterilise water jugs. But this was countermanded by her private sector supervisor. She was told that if she wished to sterilise the jugs this would have to be done in her own time. This is an example of the tension that undermines the smooth running of a ward and can lead to the unnecessary endangering of life.


  4.1  Almost a complete lack of financial analysis and reporting has frequently been noticed at the "public consultation" stage—which is early in the planning process. "Commercial Confidentiality" is often the reason given. This is an even greater problem as PFI schemes are being introduced.

  4.1.1  "Commercial confidentiality hides the truth from the public" Alistair Darling, MP, said in the mid 90s when Shadow Chief Secretary to the Treasury. Now his Government uses "commercial confidentiality" to keep vital information from the public and NHS staff.

  4.2  Consultation is inadequate both within the NHS and also at the level of the Local Authority Planning Committee. In recent experience in Oxford, viewing was invited at the "outline planning" stage of the development of new buildings and facilities on the Nuffield Orthopaedic Centre. Plans changed in the course of the following months. The consortium chosen to construct the new hospital changed the architects; designs changed, heights increased in both the PFI and the non-PFI developments. The local community was not consulted again and much discontent has arisen. At a recent public meeting, Board members gave an apology (and apologies were given by the Chair of the Planning committee at local authority level)—but consultation as such has been lacking and people are assembled merely to hear reports of a fait accompli.

  4.3  Difficulties in obtaining the Outline Business Case. In the current preparation for transferring services of the Radcliffe Infirmary to the John Radcliffe Hospital site at Headington, Oxford public consultation seems to have been lost in a fog of referring back for revision of plans, financial calculations and patient statistics. Extreme persistence was needed to track the OBC despite it having been issued more than a year ago. No one, including staff at the Radcliffe Infirmary, could inform our Secretary whether comments had been invited or whether the OBC was a fait accompli. Our Secretary traced a copy to the Oxford Central Library for viewing but was told the library would close in three weeks time.

  4.3.1  If a dedicated group like the PFI Alert Group experienced such difficulties, what of the general public? Behind this smoke screen, the cost has risen in a couple of years from £71 million to over £100 million using PFI. Questions need to be asked of the external advisors to the relocation scheme. They include KPMG, De Vere Healthcare, Sir Frederick Snow and Partners and the architects and surveyors.

  4.4  Public input ignored. Where the people persist in being involved in the planning process they are still ignored. The most striking example is that of Kidderminster. Because Worcester Infirmary had run into serious debt, plans were made to economise by running down the Kidderminster District General Hospital and the Worcester Infirmary and replacing both with one PFI built hospital. Local people felt great pride and loyalty in the Kidderminster DGH and the League of Friends had raised £400,000 for its Cancer Resource Centre. The closure of Kidderminster A&E Department caused a wave of protest which swept Dr Richard Taylor, retired medical consultant, into Parliament as an Independent MP for Wyre Forest. The closure was a particular rejection for the League of Friends of Kidderminster DGH. It raises the whole question of how volunteers should relate to PFI hospitals. The value of volunteers' contribution to the NHS nationally amounts to several billion pounds a year. For this spirit of altruism to continue the NHS needs to remain a public service. The introduction of the profit motive, via PFI and similar schemes, will extinguish this huge contribution by volunteers. This will be a major loss which has not yet been considered.

  4.5  Abolition of the Community Health Councils. These have been valuable watchdogs monitoring changes in the use and management of hospitals and other health facilities. In Oxford the CHC led the public in a battle to retain our excellent blood transfusion laboratory. More recently the Oxford CHC also led the struggle to retain the small community hospitals. VOICE is too complex a replacement and too weak and fragmented to challenge the sophisticated companies responsible for PFI hospitals.

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