The first victim of PFI?
Discussion
Megaflow said:
I going to be very interested to see the outcome of this. So what we have effectively got is a public funded NHS trust that is bankrupt and is now going to have private sector administrative cost controls put on it. I wonder how much of the overspend is due to lack of funding and how much is due to poor cost control...
My primary interest is to identify, who is actually responsible for the insolvency of the trust. Then, when the responsibility has been identified, to find out whether there be any effective action against the miscreants? I doubt both happening actually.It takes an unbelievably incompetent group of self serving idiots to bankrupt an organisation that has completely secure income and is in control of all its own costs. Having spent years working with Begbies Traynor and Cork Gully I understand how businesses can fail with market changes, unexpected failures of supply, changes in demand and all the other genuine business reasons that cause unexpected failures.
But this is plainly ridiculous maladministration. It is bad enough that the Banks can come to the taxpayer and demand Billions. Now we have the NHS funding the system once with our money and then wanting another lot because the first lot has been wasted totally. Someone has made a lot of money out of this and those responsible should be made to face the consequences of their misfeance.
I do not expect any resolution or recognition of the blame for the mess. The ability of modern politicians and their cohorts to whitewash any failure as absolutely no ones fault is breathtaking. Pity.
An examination of the FSA and its three previous incarnations, none of whom were in any way, effective, demonstrates the technique outstandingly well. We have reached the point in economic finance that all politicians aspire to. Power and wealth with absolutely no responsibility.
Now two new bodies have been created, to replace the FSA, with the intention once again, of ensuring that nothing, is ever, anybodies fault. No doubt billions more of our money, will be wasted. You could not make it up.
powerstroke said:
What happens to the hospital and other asetts??? if a company leases a lorry building ect and then goes bust its repossesed and sold off!! just curious how does it work with PFI??
More or less, from the relatively little I've seen eg. Jarvis contracts sold to other companies who then continue to try to make money from something that was never/should never have been much of an earner - halls of residence for example - while also tackling un-budgeted-for problems like the job turning out to have been done on the cheap and therefore needing about five times the maintenance spend that was expected.I'm sure there are PFI schemes that haven't gone this way but I've never knowingly seen or used one that didn't. (Taught in a couple of schools plus as mentioned my halls).
blueg33 said:
Please understand what PFI does.
It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
The government can borrow over 40 years at interest rates of below 3%.It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
The reason the previous government used PFI to fund these purchases was primarily to avoid adding published debt to the balance sheet, allowing them to "pretend" that they were still managing the level of debt.
When you can borrow so cheaply it makes zero sense to pay a private entitity (with much higher borrowing costs) to fund this type of purchase.
Ongoing maintenance contracts are different and may or may not represent good value for the taxpayer - that is much harder for an outside party to ascertain.
Steffan said:
My primary interest is to identify, who is actually responsible for the insolvency of the trust. Then, when the responsibility has been identified, to find out whether there be any effective action against the miscreants? I doubt both happening actually.
It takes an unbelievably incompetent group of self serving idiots to bankrupt an organisation that has completely secure income and is in control of all its own costs. Having spent years working with Begbies Traynor and Cork Gully I understand how businesses can fail with market changes, unexpected failures of supply, changes in demand and all the other genuine business reasons that cause unexpected failures.
But this is plainly ridiculous maladministration. It is bad enough that the Banks can come to the taxpayer and demand Billions. Now we have the NHS funding the system once with our money and then wanting another lot because the first lot has been wasted totally. Someone has made a lot of money out of this and those responsible should be made to face the consequences of their misfeance.
Actually a NHS hospital trust does not have a secure income.It takes an unbelievably incompetent group of self serving idiots to bankrupt an organisation that has completely secure income and is in control of all its own costs. Having spent years working with Begbies Traynor and Cork Gully I understand how businesses can fail with market changes, unexpected failures of supply, changes in demand and all the other genuine business reasons that cause unexpected failures.
But this is plainly ridiculous maladministration. It is bad enough that the Banks can come to the taxpayer and demand Billions. Now we have the NHS funding the system once with our money and then wanting another lot because the first lot has been wasted totally. Someone has made a lot of money out of this and those responsible should be made to face the consequences of their misfeance.
Previously the NHS budget was administrated by Primary Care Trusts (to be replaced by GP consortiums soon). They were responsible for commissioning services from acute care trusts - e.g. if they had a populaton of 100,000 then they would commission an A&E service sized for 100,000. A PCT might have several hospitals and other providers it can chose from while hospital trusts generally work with several PCTs in their region.
Many services are subject to a fixed tariff and the Payment by Results system means that hospitals are only paid for the patients they treat. So if you're inefficient at providing a service, it might cost you more than you receive for it. Likewise if you treat less patients than expected you receive less. Hence at the NHS trust level, budgets are far from secure.
To give you an example, one of the PCTs commissioning services from South London Healthcare is Bexley PCT. Bexley took full advantage of the previous Practice Based Commissioning regime (GPs decide, PCTs hold the budget). If a patient needed a heart scan they were traditionally sent to the NHS hospital in Sidcup (one of SLH's 3 sites) for an invasive angiogram. Bexley GPs decided to send their patients to a private clinic on Harley Street that used a state of the art 3D scanner that was more effective and safer. It was also cheaper. So the NHS hospital lost the income. http://www.bbc.co.uk/news/health-10789246
Unfortunately costs are not nearly as flexible - just look at the number of politicians who oppose local hospital closures. More so if certain services are subsidised by other profitable services and you lose the profitable services.
Looking at the South London Healthcare's accounts for 2010-11 (which include forecasts for 2011-12), I'm not sure the reporting is accurate. They forecasted a loss of £70 million, with PFI only accounting for about £16 million. Previous years ran losses in the region of £40m. So the real problem looks to be a big drop in income rather than PFI per se.
The real issue appears to be that the trust was created by merging three smaller trusts that were struggling but the new trust hasn't been given free rein to eliminate inefficiencies and redundancy - which is probably why they're welcoming the appointment of the Special Administrator who can try to push these changes through against political opposition.
This is a major issue across London - fundamentally, the city has far too many acute hospital care beds (more care now carried out in the community) and A&E departments. Not only are these more expensive but they can also be less effective - they lack the concentration of resources, expertise and workload.
ninja-lewis said:
Steffan said:
My primary interest is to identify, who is actually responsible for the insolvency of the trust. Then, when the responsibility has been identified, to find out whether there be any effective action against the miscreants? I doubt both happening actually.
It takes an unbelievably incompetent group of self serving idiots to bankrupt an organisation that has completely secure income and is in control of all its own costs. Having spent years working with Begbies Traynor and Cork Gully I understand how businesses can fail with market changes, unexpected failures of supply, changes in demand and all the other genuine business reasons that cause unexpected failures.
But this is plainly ridiculous maladministration. It is bad enough that the Banks can come to the taxpayer and demand Billions. Now we have the NHS funding the system once with our money and then wanting another lot because the first lot has been wasted totally. Someone has made a lot of money out of this and those responsible should be made to face the consequences of their misfeance.
Actually a NHS hospital trust does not have a secure income.It takes an unbelievably incompetent group of self serving idiots to bankrupt an organisation that has completely secure income and is in control of all its own costs. Having spent years working with Begbies Traynor and Cork Gully I understand how businesses can fail with market changes, unexpected failures of supply, changes in demand and all the other genuine business reasons that cause unexpected failures.
But this is plainly ridiculous maladministration. It is bad enough that the Banks can come to the taxpayer and demand Billions. Now we have the NHS funding the system once with our money and then wanting another lot because the first lot has been wasted totally. Someone has made a lot of money out of this and those responsible should be made to face the consequences of their misfeance.
Previously the NHS budget was administrated by Primary Care Trusts (to be replaced by GP consortiums soon). They were responsible for commissioning services from acute care trusts - e.g. if they had a populaton of 100,000 then they would commission an A&E service sized for 100,000. A PCT might have several hospitals and other providers it can chose from while hospital trusts generally work with several PCTs in their region.
Many services are subject to a fixed tariff and the Payment by Results system means that hospitals are only paid for the patients they treat. So if you're inefficient at providing a service, it might cost you more than you receive for it. Likewise if you treat less patients than expected you receive less. Hence at the NHS trust level, budgets are far from secure.
To give you an example, one of the PCTs commissioning services from South London Healthcare is Bexley PCT. Bexley took full advantage of the previous Practice Based Commissioning regime (GPs decide, PCTs hold the budget). If a patient needed a heart scan they were traditionally sent to the NHS hospital in Sidcup (one of SLH's 3 sites) for an invasive angiogram. Bexley GPs decided to send their patients to a private clinic on Harley Street that used a state of the art 3D scanner that was more effective and safer. It was also cheaper. So the NHS hospital lost the income. http://www.bbc.co.uk/news/health-10789246
Unfortunately costs are not nearly as flexible - just look at the number of politicians who oppose local hospital closures. More so if certain services are subsidised by other profitable services and you lose the profitable services.
Looking at the South London Healthcare's accounts for 2010-11 (which include forecasts for 2011-12), I'm not sure the reporting is accurate. They forecasted a loss of £70 million, with PFI only accounting for about £16 million. Previous years ran losses in the region of £40m. So the real problem looks to be a big drop in income rather than PFI per se.
The real issue appears to be that the trust was created by merging three smaller trusts that were struggling but the new trust hasn't been given free rein to eliminate inefficiencies and redundancy - which is probably why they're welcoming the appointment of the Special Administrator who can try to push these changes through against political opposition.
This is a major issue across London - fundamentally, the city has far too many acute hospital care beds (more care now carried out in the community) and A&E departments. Not only are these more expensive but they can also be less effective - they lack the concentration of resources, expertise and workload.
This has been achieved by design. Obfuscation is the political objective. Removal of all responsibility is achieved by complex, indeed indecipherable, structures, where responsibility is neatly avoided by the design of the structure.
Look at the Stafford hospital disgrace where 1000 patients had their lives ruined and literally hundreds of early deaths resulted and not one single criticism or censure of anyone has ever taken place. Because they all ticked the boxes on the forms, so that was all right. I think it is very clever and entirely deliberate. The objective is to protect the politicians and their cohorts. Nothing else matters. Unfortunately it works. Pity.
Steffan said:
Look at the Stafford hospital disgrace where 1000 patients had their lives ruined and literally hundreds of early deaths resulted and not one single criticism or censure of anyone has ever taken place.
Not only that, but the hospital still cannot find its way to providing round the clock A&E care. Since last year it has been closing from 8pm to 8am.As for the Staffs PCT, they have been blowing untold resources staging bolting-the-stable-door meetings and public consultations in rented office buildings just a few hundred yards from my own business premises. The effort and expense that has gone into the 'investigations' and public consultations is immense and (as you say) for what result?
blueg33 said:
Please understand what PFI does.
It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
It looks more expensive than other funding because it usually wraps a whole host of extras like lifetime FM.
The NHS has built many buildings outside of PFI where the Trusts say how cheap it was. With out exception each of them has millions of ££'s back log maintenance, whereas a PFI is usually maintained as its part of the contract.
The media never compare apples with apples. The get non PFI stock to PFI standards would cost the HNS billions. I have seen one tiny small health centre that needs £9m spending because it hasn't been maintained. The building is only worth £3m and I could replace it will a new all singing all dancing modern building that meets infection control standards for £6m.
Problem is that the building is listed. If it had been maintained it wouldn't now be costing NHS £9m
PFI and any other type of contract should not be entered into if you cannot afford it thats simple business sense but something that is lacking from many public sector bodies.
Yes my business is a PFI and PPP investor developer so I have a vested interest, but I also see the whole cost picture. The only way that such infrastructure can be built more cheaply is to use government cash at prudential rates. But that sill doesn't deal with maintenance etc.
But the problem isn't that the buildings cost too much, is it? The problem is that too many have been built and there isn't the need for them or the 'business' to keep them all going.It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
It looks more expensive than other funding because it usually wraps a whole host of extras like lifetime FM.
The NHS has built many buildings outside of PFI where the Trusts say how cheap it was. With out exception each of them has millions of ££'s back log maintenance, whereas a PFI is usually maintained as its part of the contract.
The media never compare apples with apples. The get non PFI stock to PFI standards would cost the HNS billions. I have seen one tiny small health centre that needs £9m spending because it hasn't been maintained. The building is only worth £3m and I could replace it will a new all singing all dancing modern building that meets infection control standards for £6m.
Problem is that the building is listed. If it had been maintained it wouldn't now be costing NHS £9m
PFI and any other type of contract should not be entered into if you cannot afford it thats simple business sense but something that is lacking from many public sector bodies.
Yes my business is a PFI and PPP investor developer so I have a vested interest, but I also see the whole cost picture. The only way that such infrastructure can be built more cheaply is to use government cash at prudential rates. But that sill doesn't deal with maintenance etc.
Edited by blueg33 on Tuesday 26th June 08:47
That's why some hospitals will need to close.
10 Pence Short said:
. . . the laws of self fulfilling prophecy.
I know little about the NHS specifics either. My knowledge is limited to the one I was involved in, where it was forced upon the service. We all knew it would be a disater. One man's self-fulfilling prophecy is another's forgone conclusion, the latter most likely when the person knows what he is talking about. In the case of the process unit, everyone involved on the police side who had experience of the procedures predicted exactly what has happened. However, it could not have been a SFP as they had no control, which is the main point. Take that away and changes in law and procedure benefit them and not the police. If the workload goes up the police take up the slack. If it goes down, money, vast sums with the swingeing cuts meaning pulling police officers off the streets, is wasted.
I came in to the procedure half way through. I had to produce a wishlist when there were going to be massive changes to the Codes of Practice which would have major implication for infrastructure.
If the idea was to save costs on buildings then one wonders why the idea of renting premises was frowned upon. It had served us well enough. Given the considerable drop in process and the drops still to come, if the force still had control massive savings could have been made there. It could have delayed removal of some officers from the streets.
The point I was making was that everyone, but everyone, knew that over time, over a short time, demand would change. There is no self-fulfilling prophecy over that. You only had to look back a year or so to see the changes that a change of mind in government forced on the police. This was a cost the police had and has to cope with year on year. Every force has procedures in place whereby these whims are coped with and not a lot of money is spent. But with PFI that flexibility is lost.
PFI may or may not be able to work with the demands of the NHS. I don't know. However, from the point of view of my old job, all it turned out to be was a way of wasting money for no particular gain. They are paying for something, and will continue to do so, for something that they could do a lot cheaper. And we're at it again with this government. Privatise is not a synonym for saving money.
DSM2 said:
But the problem isn't that the buildings cost too much, is it? The problem is that too many have been built and there isn't the need for them or the 'business' to keep them all going.
That's why some hospitals will need to close.
Indeed, but why blame PFI when its Commissioning that's at fault. All the PFI entities do is respond to a need advertised by the NHS or other public sector.That's why some hospitals will need to close.
The public sector has a range of procurement options open to it, that's why I am saying don't lay this at the door of PFI
sidicks said:
blueg33 said:
Please understand what PFI does.
It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
The government can borrow over 40 years at interest rates of below 3%.It provides new infrastructure for the SAME build cost as it would cost using other funding routes
It provides senior debt and equity at rates below the market rate because the government covenant adds security. Eg Market yields are circa 8% PFI and PPP yields on entry are down at 5%.
The reason the previous government used PFI to fund these purchases was primarily to avoid adding published debt to the balance sheet, allowing them to "pretend" that they were still managing the level of debt.
When you can borrow so cheaply it makes zero sense to pay a private entitity (with much higher borrowing costs) to fund this type of purchase.
Ongoing maintenance contracts are different and may or may not represent good value for the taxpayer - that is much harder for an outside party to ascertain.
Its up to the Govenment and commissioning bodies as top what procurement route they use. PFI provides the government with cash flow benefit.
As for ongoing maintenance, the point was that when people say PFI is expensive, they are not comparing like for like.
All of the costs are benchmarked and pfi bids are competitive process. We do not make it more expensive than it needs to be, otherwise we would fail on the bid and these things cost £££££'s to bid.
Nom de ploom said:
and how can a hospital trust have a landlord? is landlord a term for the debt owner?
Think of PFI as a sort of sale and leaseback, that's how there is a landlord. The cost of the building and its maintenance is rentalised over say 25 years. The PFI entity charges rent which pays for the infrastructure etcThe issues debated here lie with any public procurement for infrastructure
1. It is to meet a demand now yet the process takes years (we are working on one where the process is now 8 years old and a final decision still hasn't been made)
2. The public sector do not have enough of the right skills in the right place to manage it
3. The government want to encourage the input of private money, this needs a return. (Our schemes are typically geared so that the private equity element is 30% the balance is senior debt)
4. The bidding costs are far to high because of the process that are put in place by the Government and the inability of the commissioning bodies to understand that process. (The last one we bid and won had bid costs alone of £1.4m) Even the small ones cost hundreds of thousands to bid
5. There are way to many advisors paid by the hour working for the commissioning body
Fundamentally the problem lies in commissioning, it is very difficult to understand what services and space communities will need in the future. What is clear is that current stock is so badly maintained and of poor quality for infection control, incompatible with technology etc that a way has to be found to deliver new infrastructure.
The focus should be on speeding the procurement process (which ever one is used and there are many) so that the asset is delivered in time and is affordable. If a trust cannot afford it then its up to the management of the trust to make the relevant decision, it is not up to the entity that is delivering the infrastructure.
1. It is to meet a demand now yet the process takes years (we are working on one where the process is now 8 years old and a final decision still hasn't been made)
2. The public sector do not have enough of the right skills in the right place to manage it
3. The government want to encourage the input of private money, this needs a return. (Our schemes are typically geared so that the private equity element is 30% the balance is senior debt)
4. The bidding costs are far to high because of the process that are put in place by the Government and the inability of the commissioning bodies to understand that process. (The last one we bid and won had bid costs alone of £1.4m) Even the small ones cost hundreds of thousands to bid
5. There are way to many advisors paid by the hour working for the commissioning body
Fundamentally the problem lies in commissioning, it is very difficult to understand what services and space communities will need in the future. What is clear is that current stock is so badly maintained and of poor quality for infection control, incompatible with technology etc that a way has to be found to deliver new infrastructure.
The focus should be on speeding the procurement process (which ever one is used and there are many) so that the asset is delivered in time and is affordable. If a trust cannot afford it then its up to the management of the trust to make the relevant decision, it is not up to the entity that is delivering the infrastructure.
This whole business was dreamt up by Tony Blair and his henchmen. This was always designed simply to allow even more government spending without it counting as government spending directly and for that reason alone.
PFI is an expensive waste of public money. Which for a Labour government is about par for the course. We have to learn as a society that we cannot afford to spend more than we earn, no matter what we disguise it as or call it.
The tragedy is that politicians have all become so married to the "lets print some more money that will solve the problems", approach to economic difficulties to the point where, the entire UK government borrowing requirement has become grossly overextended and out of control. This is completely unaffordable by the UK.
We either address this, or face national financial ruin in a very short time. The likes of PFI have to go.
PFI is an expensive waste of public money. Which for a Labour government is about par for the course. We have to learn as a society that we cannot afford to spend more than we earn, no matter what we disguise it as or call it.
The tragedy is that politicians have all become so married to the "lets print some more money that will solve the problems", approach to economic difficulties to the point where, the entire UK government borrowing requirement has become grossly overextended and out of control. This is completely unaffordable by the UK.
We either address this, or face national financial ruin in a very short time. The likes of PFI have to go.
blueg33 said:
DSM2 said:
But the problem isn't that the buildings cost too much, is it? The problem is that too many have been built and there isn't the need for them or the 'business' to keep them all going.
That's why some hospitals will need to close.
Indeed, but why blame PFI when its Commissioning that's at fault. All the PFI entities do is respond to a need advertised by the NHS or other public sector.That's why some hospitals will need to close.
The public sector has a range of procurement options open to it, that's why I am saying don't lay this at the door of PFI
It's not the way it it was done, it's that it was done at all.
Steffan said:
The likes of PFI have to go.
What would you replace it with? It what way would it be cheaper or better?think tank said:
Andrew Haldenby, from the think tank Reform, told the BBC that some other PFI schemes had delivered good hospitals and good value for taxpayers.
The point being, lets not tar all with the same brush, and have a proper understanding of what is needed and how it is going to be funded.But, don't take too long, NHS has already had a 2 year hiatus and the existing infrastructure is degrading by the day
Edited by blueg33 on Tuesday 26th June 17:32
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff