Monday, 21 March 2011

The ever rising costs of PFI?

For most of our patients and indeed ourselves being all multi millionaire GPs the biggest investment we make is buying a house. Most people in order to do this, unless you have oodles of cash stuffed away in your mattress, use a loan to finance this purchase usually called a mortgage.

To keep the maths simple let us say you borrow £ 100,000 over 25 years at a fixed annual rate of 5% interest. How much would you end up paying in total?

We think the answer is about £ 175,000. So that is the total cost of loan and interest to buy something worth £ 100,000.

During the second world war Britain borrowed money from the USA and Canada and finally paid this off in 2006. According to this article the USA loaned the UK £ 2.2bn and the UK paid back a total of £ 3.8bn over 61 years at 2% interest per year. Granted these were desperate times but the figure repaid is about three quarters of that borrowed similar to the house mortgage.

So how much does it take to repay the loan taken out to build a new hospital? A trip to another part of Northernshire gave us an idea. A news item on a local TV station lead us to this programme and if you have 5 or so minutes then watch from 36.37 onwards. We have touched on this topic not too long ago as well.

So to build a hospital costing £ 65 million using the examples above you might think the total cost would be around £ 114 million if you say three quarters is the amount paid back on top of that borrowed.

According to the programme the ANNUAL repayment figure is £ 16 million pounds a year (about 14.5 fully staffed 7 doctor practices) so perhaps the total capital will be paid back in just over 4 years then a few more repayments and the interest would be covered too?

Well no according to the programme the total cost will be £ 570 million when the bill is finally paid in 2045 - 45 years, £ 570 million in total for £ 65 million of hospital.

This is the cost of the first PFI hospital - there are over a hundred NHS hospitals financed in this way - introduced not in war time but in relatively affluent times which is going to make a small number of people very happy and rich and make a lot more much poorer.

It seems that PFI doesn’t just take the people’s money it also takes something far more basic in terms of an excretory function. For once the two major Parties are to blame for one created the concept and the other exploited it so we all have been shafted equally by both.

Praise be to the Party for its fiscal prudence not just then but for many more years to come. The zeros coming out of local healthcare budgets will continue to rise for years to come. As someone said pay for almost 2 houses to buy one with a mortgage but with PFI pay for 8.77 hospitals and get just one.

Pure world-class prudence.


Anonymous said...

Another difference is that after the mortgage is finished the house is yours. The PFI hospital still belongs to the corporation leasing the hospital and does not (unless specified in the PFI agreement) revert to the leasee.

Muhammad Shoaib said...

“You really know your stuff... Keep up the good work!”
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