Defend Public Healthcare

The growing crisis of public private partnership (P3) hospitals in Britain has now forced the health minister to announce that he will be sending in “hit squads” to make savings at twelve hospitals where the P3 contracts have gone “horribly wrong” the conservative   Daily Telegraph  reports. This is a follow up from the government's February  announcement  that seven health care trusts with P3 (or, as the British call them, "PFI") hospitals would get  £1.5 billion in emergency funding to help them avoid cutting patient services as a result of their P3 deals. The Health Minister Simon Burns told the   Press Association , "there are these seven which are at the top of the scale, which are having a significant drag on their day-to-day running because of the PFI costs. The trusts have got significant problems as a result of these irresponsible PFI schemes that the last Labour government allowed, and we have said, with those, that if they have a regime in place th

Oh brother - how bad can the public burden for public private partnerships (P3s) get? Several years ago, not long after the world-wide financial crisis, OCHU did a campaign warning of the extra costs that would be loaded onto the public through P3s. The financial crisis was driving up the costs of private borrowing and the result would be more costly P3s. Sure enough, milestone payments by the government were introduced to make it easier for the P3s to obtain sufficient capital to finance the projects. The P3s were becoming P4s: public-public private partnerships, as governments were forced not just to pay for the projects but also to get in on the financing side as well. Following repeated P3 crises in England, the British government is taking this to all new levels. With private financiers unwilling to stick their necks out for long term loans given the current financial situation, the government has just announced that it is stepping in, not just with milestone payments, but

The governing Scottish Nationalist Party (SNP) is crowing that it has avoided the hospital P3 privatization crisis of its southern neighbor. The crisis of yet another P3 (public private partnership, or PFI) hospital in England demonstrates "the failings of PFI and the privatization agenda souther of the border". The SNP adds: "Mid Yorkshire Hospitals Trust is losing £100,000 a day, with services set to be substantially cut as a result. Earlier this year it was discovered that the PFI hospital in Wakefield which is part of this trust was turning away ambulances because of a lack of capacity. These developments follow the recent announcement that South London Healthcare was in danger of being dissolved, despite having received £150 million in bailouts over the last three years." Sandra White, a SNP Member of the Scottish Parliament is quoted by the SNP: "This latest private health crisis for the NHS in England shows just how badly PFI has damaged the hea

The mother country of public private partnerships (P3s) is now preparing to take over a nearly bankrupt health care trust that runs three hospitals.   Like other British hospitals, the South London hospital trust was devastated by its P3 deals. The mother country in question -- Britain --  will take over the hospitals and run them under a trusteeship, probably within weeks. A Department of Health official reports the hospital trust is spending £61 million per year on two P3 deals, forking over  14% of its income.  The hospital trust is losing £1 million a week.   The trust has accumulated a deficit of £150m (about $240 million).  The P3 fiasco has led some Conservatives to question whether the P3 deals transfer risk to the private sector. With the announcement, a senior Conservative British MP, Stephen Dorrell (the former health secretary who now chairs the Commons health select committee), suggests that P3 lenders should, like lenders to Greece, bear their share of ri

Canadian banks have usually  preferred  to limit their P3 (public private partnership) involvement to [a]  financial advice, and [b] financing  over the construction period  for the public facility being built (i.e. two to three years of financing rather than the twenty to fifty years of P3 financing required after construction). European banks (whose problems you may have been reading about lately) however have been a major player in the long term financing of P3 deals in Canada.  The 2008-9 financial crisis raised more questions over the claim by the banks and the rest of the P3 industry that the extra costs associated with P3s (compared to normal infrastructure procurement) was offset by a “risk transfer” to the private sector.   (To offset the large financing cost advantage of normal government infrastructure development, P3 supporters have to claim that considerable risk is transferred to the private sector  -- and that the public should pay a LOT of money for the risk tran

Six months after repeated disasters forced the British government to review its policy to develop infrastructure via public private partnerships (P3s), the number of new P3 projects has fallen dramatically.  The Financial Times reports that 85% fewer P3 projects were agreed to in the first four months of 2012 compared with one year earlier. The construction industry is not pleased: The  head of the UK Contractors Group (comprised of 30 big contracting firms) said the government needed to make “clear decisions soon... I don’t know if the government is going to tweak the model or do something more radical. But it would be good to have a clear signal from government as to where they are going with it.” The head of infrastructure at KPMG,  told the Financial Times “The industry is being crushed between the loss  of commercial activity and the government turning off the tap on its own spending. It needs projects now." P3 corporations made very big profits for many years from

The British Association of Chartered Certified Accountants  and Manchester Business School have concluded that "The value-for-money case for PPP (public private partnerships or P3s) in the public sector has yet to be proven. The benefits gained from the availability of 'extra' finance, the transfer of risk from public to private sector, and improvements in decision-making processes are too nebulous to provide any certainty that they outweigh all the known problems." Author Professor Graham Winch of the Manchester Business School told the Telegraph ,  "PFI (another name for P3s) has undoubtedly allowed the UK to acquire more social infrastructure earlier, and this has stimulated short-term economic growth, but it has led to an overhang of debt in the shape of commitments to unitary charges stretching some 30 years into the future and constraints on the flexibility of public bodies in using their infrastructure".

The National Audit Office (NAO) in Britain finds  profits for investors were expected to exceed the target of 12% to 15% in 84 of the 118 public private partnership (P3) projects that it analyzed . Instead, investors regularly see profits of between 15% and 30% by selling their equity in the secondary market. The government responded to the report by stating the analysis “needs to take into account a wider range of issues that together contribute to the overall economics of a transaction, rather than merely looking at equity returns”. For its part, Construction News   concludes   "the  root cause (for the high profits) is that civil servants are not sufficiently competent to stand up to bankers on complex financial issues." I'd say even 12% to 15% percent  is a pretty good return (never mind 15% to 30%) --  especially when  the investors are dealing with a pretty safe credit risk -- the government.  The NAO report itself concludes, "investors be

The conservative newspaper The Telegraph reports that an economic think-tank, The Integenerational Foundation, has found that the total cost of  British P3s (public private partnerships) has reached such great heights that it is threatening Britain’s AAA credit rating. The credit rating determines how cheaply the Government can raise money on the international markets. The lower it goes, the more it costs the government to borrow money. The think tank reports that the P3 debts are £239 billion ($380 million), 80 per cent higher than the report of £131.5 billion in P3 debts released this week by the government in its new "Whole of Government Accounts". The think tank warned the cost of P3s has been under-appreciated. “Such build-ups clearly put Britain’s AAA credit rating at risk by adding over a quarter to the country’s £1 trillion national debt,” said Angus Hanton, co-founder of Intergenerational Foundation. Reportedly, P3 debt is up to £13,000 per taxpaying househ

British "taxpayers face a £200bn ticking timebomb from long-term spending commitments that have not been properly costed," the Independent reports. "The Commons Public Accounts Committee criticised the Treasury for not keeping a grip on the 'staggering numbers'  involved in 'spend now, pay later' projects which are a storing up massive bills for future generations." Most of the debt (£131.5 billion) is for privatized P3 (public private partnership) projects, primarily hospitals and schools.   The P3 debt is "four times more than the assets secured by the deals". The other £70 billion of unaccounted debt is for decommissioning nuclear power stations and outstanding claims for medical negligence. The government promises to end P3s "as we know it" (although the changes the Conservative government will implement will almost certainly be less than one might hope).  Ontario merrilly continues with its own P3 program for hospitals, ev

Privatized P3 (public private partnership) hospitals in Britain are proving so expensive that seven of them will get £1.5 billion ($2.4 billion)  in emergency funding from the government to help them avoid cutting patient services, the Guardian reports.  The hospitals will be able to access the £1.5 billion over the next 25 years, until their P3 contracts end. Andrew Lansley, the British health secretary, said he had been forced to use taxpayers' money because certain hospitals could no longer afford their P3 deals. The Conservative health secretary blames the previous Labour government for bungling the P3 deals, although critics of  P3s had long claimed that the deals were far too expensive.   "The problems facing some parts of the NHS left to us by Labour now have to be sorted out. Tough solutions may be needed for these problems, but we will not let the sick pay for Labour's debt crisis," the Conservative health secretary claimed.   The Guar

The largest public private partnership (P3) bond financing in Canada has raised $1.37 billion for a new Montreal hospital. It is for what must be one of the longest P3 deals as well -- a 38.8 year deal to build, finance, and maintain the Centre hospitalier de l'Université de Montréal (CHUM). The National Post reports that the four equity partners in the P3 deal are all European corporations. Canadian and Quebec partners were squeezed out once again, it seems. The P3 financing deal is also the lowest-rated one ever to come to market. The Post reports that the bonds came with a 6.721% coupon. "Part of the difficulty attracting buyers was the credit profile of the investment. The issue was rated BBB (high) by DBRS, one notch higher than the Baa2 assigned by Moody's Investors Service Inc. Every single P3 that has been broadly marketed so far in Canada has enjoyed an A-level rating." The Post goes on to note: "If the CHUM deal proved one thing, it's

More complaints about the high cost of basic maintenance in "public private partnership" (P3) hospitals are coming. This time, Dr. Dan Poulter, the Conservative Party British Member of Parliament for North Ipswich and Ventral Suffolk, has complained about the costs of "odd jobs" in the local P3 hospital. P3 hospital deals typically require the contracted private company to provide maintenance in the hospital -- rather than regular public hospital staff. EADT24 reports  that the hospital paid £120 ($190) for contractors to assess a door which had given someone a static shock. After investigating, the maintenance firm said the door was not its responsibility, but the hospital was still forced to pay for the call-out.  Since 2008 there have been 14 call-outs to replace the glass on a fire alarm costing £1,680 ($2,650). Dr Poulter said: “Patients are being short-changed because of this, money which should be being spent on them is being spent on these fees. It is crip

Here's a  report on a recent investigation into spending for routine maintenance at a British public private partnership (P3) hospital: "The North Cumbria Hospital Trust has paid £466 to replace a light fitting, £75 to install an air freshener, £184 to have a bell put into a reception area, £977 to install six double sockets, £110 to fit a shelf... and so it goes on. It goes on to the tune of £1,942,842 spent on routine maintenance in 2010/11. This from a debt-ridden trust haemorrhaging £1.2 million a month." £1,942,842 is over $3 million.   The investigation into the P3 was done by the British Conservative Party, hardly a bastion of anti-privatization bias. A number of the British P3 hospitals are so weighed down by the cost of their P3 deals that they have asked government for special compensation to help them pay their bills.  Here is the conclusion reached by the editorialists at one local British paper: "Ministers are urgently considering this which wil

Last night Andrew Lansley, the British health minister, condemned the high fees charged by private corporations to do basic repair work in public private partnership (P3) hospitals.   P3s allow private corporations to become involved in the financing and maintenance of hospitals.   Ontario has followed Britain into using P3s for hospital projects. Lansley told the Telegraph : "[Hospitals are] being forced to spend extortionate sums on private contractors rather than spending that money on helping sick patients get better." The Telegraph (a conservative newspaper) reports that a series of Freedom of Information requests has disclosed how hospitals that are locked into long term P3 deals are forced to pay “hyper-inflated” charges for basic services.  Figures uncovered by the Telegraph show the following examples of charges from private corporations that won P3 hospital contracts: North Staffordshire hospital paid £242 to put on  a padlock North Cumbria University Hospi

The conservative British newspaper, the Telegraph reports that British taxpayers now face paying five per cent more per year for hospitals built through public private partnerships (P3s) because the debts are linked to inflation.  P3s bring private corporations into hospital financing and support services. When the BBC program Panorama contacted 85 hospital trusts with PFI deals, it found 80 of them said they were having to make increased payments to the corporations due to inflation. The hospitals did not protect themselves against inflation, while the private P3 corporations did, it seems. Margaret Hodge, the Labour MP who now chairs the Public Accounts Committee, admitted to the BBC program: "We should have been much more transparent about the costs. I think we got the balance wrong." Richard Bacon, a Conservative member of the committee, said he thought taxpayers were being "ripped off". Ontario is going ahead with its own privatized P3 hospital spree, despi

Negotiations have begun to increase funding in Britain for hospitals laid low by the burden of expensive public private partnership (P3 or, as the British say, PFI) deals.   P3s bring private corporations into hospital support services and hospital financing. A Maidstone and Tunbridge Wells hospital spokesman told Kent media : “MTW is part of a national review of NHS trusts that require financial assistance to support their private finance initiative (PFI).  The trust is working closely with its PCT commissioners, strategic health authority and the Department of Health as part of this ongoing assessment." Maidstone and Tunbridge Wells hospital is one of 22 trusts identified as needing cash support to meet its P3 payments. Its privatized P3 hospital is brand new.   British Treasury Select Committee P3 advisor Mark Hellowell recognizes that P3 hospitals have higher fixed costs and so  argues that they must be paid more per procedure than other hospitals. "Since some

The British government,  as  noted ,  is trying to lure pension plans in to the government's deeply troubled public private partnership (P3) infrastructure development. The business oriented newsmagazine, The Economist  reviews this proposal and concludes with some words that should provide some caution for anyone who might need a pension one day. "The infrastructure plan may also point to a longer-term possibility. Two academics, Carmen Reinhart and Belen Sbrancia, have suggested financial repression as one way out of the debt crisis—forcing domestic investors to accept negative real returns. Pension funds are being invited to invest in these plans on a voluntary basis. But their assets are a very tempting pool for politicians to tap. Some day in the future, pension funds may find they are obliged to invest in such projects, regardless of the potential returns—for the good of the country, of course." That would be a very negative outcome for pension plans --

The Canadian Construction Association is lobbying the federal government to consider other methods of infrastructure development than the current public private partnership (P3) model. A Vancouver construction industry report indicates that P3s " have worked only for a handful of very large Canadian construction firms. Ninety per cent of the Canadian construction industry, however, is made up of small and medium-sized firms." "The problem is in the financing component of the P3s.  Traditionally, Canadian general contractors have depended on bonds purchased from the bonding industy for financial backing for projects. P3s don’t use bonds in the same way. They require letters of credit – cash from recognized financial institutions.   Often P3s require 10% of the cost of a project covered by money in the bank. On a very large project, that can amount to hundreds of millions of dollars.   Most construction companies in Canada are not financially l

As noted earlier , the British government is reviewing its use of public private partnerships (P3s, or, as the British call them, PFIs) for the development of public infrastructure like new hospital buildings.  The government now says  it's the   ‘end of PFI as we know it’.      Unfortunately,  they seem to be more interested in simply pulling pension plans and foreign money into the PFI vortex. The PFI advisor to the British House of Commons Treasury Select Committee,  Mark Hellowell waded in to this mess earlier this week . Instead of wrapping pension plans into PFIs, he points to a cheaper way to involve pension plans in infrastructure. "The Treasury is currently pulling its hair out trying to find ways of bringing pension funds into infrastructure investment. But the cheapest way to do this is, of course, to sell bonds to them.  They will currently buy them at a real interest rate of something like minus 3% – not bad for projects that will put people into work in th