The Private Finance Initiative (PFI) was introduced in 1986. The
aim was to bring private finance into publicly-sponsored capital
projects, whether roads, prisons or in this case, hospitals. Since then,
few projects have been signed and the process has been criticised for
its sluggishness and controversy over whether the private cash replaces
or boosts government input.
General Healthcare Group, which owns and operates 25 hospitals in the
UK, is working in a consortium with builders John Laing and merchant
bank BZW to build the new pounds 170 million Norfolk and Norwich
Hospital. The deal is the largest on the PFI drawing board.
Unfortunately, for the past two years, that is just where the deal has
been stuck, waiting for the government to give the thumbs up.
The Treasury Committee held a short enquiry into PFI in January
General Healthcare asked Pielle to outline its problems with PFI to the
committee. First, that private sector expertise had become much more
sophisticated since the mid-1980s and negotiations needed to take this
into account; civil servants needed training in PFI - preferably several
weeks as part of their civil service treasury training; and finally PFI
contracts should take account of long-term timescales and not get bogged
down in details, such as menus and lawn mowing frequency, at too early a
stage in discussions.
The report was published in May.
Pielle (whose chairman is former Welsh Secretary Peter Walker) submitted
two memoranda to the committee, detailing the group’s concerns on PFI,
the provision of clinical services, the monitoring and bidding process
and the training of civil servants. It also supported reports by the
Adam Smith Institute and the Fabian Society and supplied the memoranda
to backbench committees and the Treasury. It set up a meeting between
General Healthcare and John McGregor, MP for Norfolk and former Chief
Secretary to the Treasury.
This deal was given the final go-ahead in the Chancellor’s budget speech
last November. Pielle achieved watered down versions of its main
objectives - that civil servants should have some training in PFI
negotiation and initial bids should not demand the level of detail
initially required by the government.
Committees don’t often quote directly from evidence in their
conclusions, but there was a specific mention of one of General
Healthcare’s points in the summing up. ’It was practical, cogent and
short. Their points were honest and we felt they put them as well as we
could,’ said one member.
Campaign: Private Finance Initiative on behalf of General Healthcare
Timescale: 12 months
Cost: Around pounds 30,000
PR Team: Pielle