[NYTr] The Fat Cats Protection League

[All the News That Doesn't Fit]

The Guardian - Sep 4, 2007
http://www.monbiot.com/archives/2007/09/04/the-fat-cats-protection-league/


The Fat Cats Protection League 

Wherever you hear the words free market, youll find 
massive state handouts to corporations 

By George Monbiot

After my column last week, several people wrote to point out that the
neoliberal project - which demands a minimal state and maximum corporate
freedom - actually relies on constant government support. They are of
course quite right. The current financial crisis, caused by a failure
to regulate financial services properly, is being postponed by
government bail-outs. The US Federal Reserve has reduced its lending
rate to the commercial banks, while the Bundesbank organised a E3.5bn
rescue of the lending company IKB. This happens whenever the banks
suffer the consequences of the freedom they demand. But over the past
week an even starker example has emerged. 

In Britain the split loyalties of the major political parties has
created a hybrid system of public provision. If it left public services
intact, the party in power would be roasted by the corporate media, but
if it attempted full-scale privatisation, it would be booted out of
office. So the last Conservative government devised a plan which would
keep both sides if not exactly happy then at least totally bewildered.
They called it the private finance initiative, or PFI. Corporations
would build and run our schools, hospitals, roads and prisons and rent
them to the state. This, the Tories maintained, would enable costs to
be cut, while ensuring that public services remained free of charge. 

At first Labour opposed this scheme. Alastair Darling warned in
opposition that apparent savings now could be countered by the
formidable commitment on revenue expenditure in years to come(1). But
as the 1997 election approached, Labour sought to prove that it was
more sympathetic to business than the Tories. Two months after the
party took office, the health secretary, Alan Milburn, announced that
when there is a limited amount of public-sector capital available, as
there is, its PFI or bust(2). From then on, the only money the NHS
could rely on for capital projects belonged to the private sector. 

The problem was that much of what the NHS wanted to do was not
attractive to private financiers. In Coventry, for example, it had been
planning to refurbish its two hospitals at a cost of #30m(3). But its
analysts realised that business would not be interested. The scheme was
too small and there was no scope for the financial innovation which
could produce serious profits. As a confidential report by the local
health authority showed in 1998, the health service re-designed its
scheme to make it more attractive to private capital(4). Instead of
refurbishing the two existing hospitals, it would ask private business
to knock them down and build a new one - the University Hospital. This
would cost not #30m but #174m. The health experts who wrote the
confidential report predicted than in order to find this money, the
hospital trust would have to cut both beds and services. They have just
been proved right. 

Did I say #174m? I beg your pardon. By January 2002, the price had
risen to #290m(5). A month later it reached #311m. By the end of that
year it had grown to #330m(6). In 2003 it was estimated at #370m. In
March 2007, the Birmingham Post reported that the final cost was
#410m(7). This year the hospital trust must find #56m, in the form of
repayments and service fees, to hand to the private consortium(8). The
annual cost will rise in line with the retail price index for 30 years. 

It is now pretty obvious that this fee is unpayable, if the hospital is
to maintain a proper standard of care. Over the past few days the
hospital trust has announced a #30m hole in its budget(9). Around #10m
of the necessary cuts could be found by making staff redundant: it will
lose perhaps 200 people, possibly 375. It will also rely on revenue
generating activities. These include charging people #3 for dropping
their sick relatives outside the hospital, and #10 for parking there,
while cancelling the free parking scheme for disabled people. As the
new hospital (against the wishes of 160,000 people who signed the
Socialist Partys petition to have it built in the city centre) is on
the edge of the city, which means that it is hard to reach without a
car, this is an effective way of raising money. But it casts doubt on
the governments claim that the NHS remains free at the point of use. 

The trusts press officer told me that this cost-cutting is a unique
event: we have always balanced our books up to this year(10). But in
2005 - the year in which the PFI payments began - a leaked memo
revealed that the trust was anticipating a deficit of #13m by the end
of the financial year and drastic measures were required to plug the
gap(11). These included the closure of one ward, the removal of eight
beds from another, limiting the opening hours of the Surgical
Assessment Unit and the rationalisation of certain posts: which meant,
eventually, cutting 116 jobs(12). 

In 2006 the local paper reported a shortfall of #29m(13). This was met
partly by freezing the recruitment of district nurses. In January this
year, the hospital announced that it was closing another ward, just six
months after it opened(14). Yet another ward - treating people with
acute conditions such as pneumonia and strokes - was closed in
June(15). The impact of these cuts is already being felt: three months
ago the new hospital found itself in the bottom ten in the national
league table for waiting times(16). Where will the money come from over
the rest of the 30-year contract? 

There is one set of costs the hospital cannot cut: the money it must pay
every year to the private financiers. In September 1997 the government
declared that these payments would be legally guaranteed: beds, doctors,
nurses and managers could be sacrificed, but not the annual donation to
the Fat Cats Protection League(17). The great free market experiment
looks more like a corporate welfare scheme. 

The government justifies all this by claiming that privately financed
schemes are cheaper than comparable public schemes. Allyson Pollock
showed on these pages in April that the data required to support this
claim does not exist, or if it does the government refuses to release
it(18). But as the Coventry scheme shows, theres an even bigger
deception at work. The government compares the cost of building the
hospital under PFI with the imagined cost of building it with public
money. But it would not have been built with public money. If public
funds had been available, the two existing hospitals would have been
refurbished, at around one 13th of the cost. 

It was Gordon Brown who insisted that PFI became the principal means of
funding capital projects in the United Kingdom. By deferring costs into
the future, as Darling warned, he was able to sustain his reputation as
an iron chancellor, while suppressing the constant baying of the
corporate press. The BBC predicted that in his speech yesterday, Brown
would announce a reduction in the corporations involvement in the
public sector(19). It was about the only subject he did not
discuss(20). For all his talk of listening and engaging, corporate
power still seems to be forbidden territory. 

References: 

1. Alastair Darling, quoted in the Financial Times, 11th January 1997. 

2. Alan Milburn, quoted in The Guardian, 4th July 1997. 

3. Allyson Pollock, Jean Shaoul and Declan Gaffney, July 1998. The
Walsgrave Hospitals PFI Development: A Report to the Coventry and
Warwickshire Health Authorities. Leaked copy. 

4. ibid. 

5. Coventry city councillor Dave Nellist, 20th November 2002. #200
million rise in 3 years - is the Coventry superhospital the biggest PFI
health rip-off in Britain? Press release.

6. ibid. 

7. No author, 1st March 2007. Health economy on life support. Birmingham
Post. 

8. Andy Hardy, finance director, University Hospitals Coventry and
Warwickshire NHS Trust, 3rd September 2007. Pers comm. 

9. University Hospitals Coventry and Warwickshire NHS Trust, Late August
2007 (no date given). Hospital on track to achieve #30 million savings
but regrets final phase of saving plan will involve job cuts. Press
release. http://www.uhcw.nhs.uk/media/news.php?action=view&newsID=91

10. Chris Capewell, 3rd September 2007. Pers comm. 

11. Keith Dibble, director of operations, surgical services division,
University Hospitals Coventry and Warwickshire NHS Trust, 2005.
Divisional Briefing Note. Leaked copy. 

12. Sinead Keller, 23rd August 2007. 200 hospital jobs will go to help
save #10m. Coventry Evening Telegraph. 

13. Fiona Scott, 3rd June 2006. Yet another cash crisis for Walsgrave.
Coventry Evening Telegraph.

14. Hannah Murdoch, 19th January 2007. Ward shuts at new hospital.
Coventry Evening Telegraph.

15. Alan Harris, 2nd June 2007. Nurses reassured as hospital ward
closes. Coventry Evening Telegraph.

16. No author, 11th June 2007. Hospital waiting times revealed. Coventry
Evening Telegraph.

17. The review that led to this decision is reported in Government
Opportunities, August 1997, Volume 3, No.2. 

18. Allyson Pollock, 11th April 2007. A gauntlet for Brown. The
Guardian. 

19. The World This Weekend, 2nd September 2007. BBC Radio 4. 

20. Gordon Brown, 3rd September 2007. Speech to the National Council of
Voluntary Organisations.
http://www.number-10.gov.uk/output/Page13008.asp