It is increasingly evident that the only way that NHS hospitals can balance their books is by cuts, closures and more privatisation. It is a vicious circle where hospitals will inevitably have to drop unprofitable services in order to survive while simultaneously people will be pushed further every day to pay for basic services. Against a backdrop of thousands of job losses, angry nurses heckled Health Secretary Patricia Hewitt as she spoke at the Royal College of Nursing conference in Bournemouth at the end of April.
The worst affected hospitals were those with the PFI agreements:
- University Hospital North Stafford with a £350 million PFI deal will lay off 1,000 staff;
- Worcestershire Acute hospitals struggling with a £95 million PFI will shed 720 staff and will need to save £20 million;
- County Durham and Darlington acute trust, paying off a £61 million PFI deal over 30 years will cut 700 jobs;
- Norfolk and Norwich hospitals will lose 450 staff.
To date, 13,000 job losses have been announced. Thousands more will take place as Primary Care Trusts and Strategic Health Authorities are reorganised. Inevitably waiting lists will lengthen and rationing of treatments will increase.
The Centre for International Public Health Policy (CIPHP) at the University of Edinburgh has reviewed a sample of eight PFI schemes and shown that the share of their annual revenue devoted to servicing capital costs rose from 4.5% to 16%. Two years after completion of the Norfolk and Norwich PFI project, Barclays, Serco, Innisfree and John Laing decided to refinance their joint working company Octagon. This allowed them to take an immediate gain of £115 million. They gave £34 million to the hospital trust and kept the rest, increasing their rate of return from 16% to 60%. According to the local MP, the trust would have to pay £257 million to terminate the contract early. To pay the PFI consortia, hospitals have had to cut beds by an average of 25% and staff by 15%.
It is not just PFI deals which are creating financial problems for the NHS, but the re-introduction of the internal market and ‘payment by results’ as well. This means that hospital trusts will be paid in arrears for any work they undertake. According to CIPHP head Allyson Pollock, the annual costs of operating the NHS market in England are approximately £10-12 billion. That money is spent
‘…on invoicing, accounting for and auditing the accounts of millions of individual patients treatments, on making and monitoring thousands of contracts, on management consultants and financial “rescue” teams from the private sector at £2,000 plus per consultant per day, on marketing and advertising and on lawyers and communications, and so on and so on, as hundreds of competing NHS trusts each try to survive in the new marketplace’.
In the mid-1970s, the administrative costs of the NHS were approximately 5-6% of its total spending. Currently they are approaching 20%. This is inevitable for an increasingly privatised system. Even foundation hospitals are now feeling the pinch. Based on last year’s budget, Homerton University Hospital Foundation Trust in East London needed £140 million for this year. Its forecast income is only £133 million. The £7 million deficit arises because the Department of Health has set the price increase for each treatment it undertakes at just over 1% when health inflation is running at 6.5%. The Homerton will lose 100 of its 2,000 posts, which is 5% of the workforce. Expect further market-induced chaos in the NHS over the coming months.
FRFI 191 June / July 2006
