Corbyn and Re-nationalising the NHS – Fantastic Views On Use Of Private Sector

Jeremy Corbyn, leader of the Labour Party, says that he will stop PFI (private finance initiative) contracts if he becomes Prime Minster. He pledged cash for "patients not contractors" as he set out plans to "renationalise" the National Health service (NHS) and end "privatisation". The Labour leader committed to stopping private finance initiative (PFI) contracts which he claimed "leak money away from front line services".

Well, he has a point. PFI contracts for new hospitals were often agreed in the early days of PFI when government (and its advisers) were naïve and ended up giving the funders of such schemes excessive profits. Re-financing the debt as interest rates fell gave them massive windfall gains. Later iterations of PFI policy tried to ensure those gains were shared with the public sector buyers. But in the early days, a lot of money was made by the PFI providers.

It would be very easy to for Corbyn as PM to stop new PFI contracts, which are pretty rare now anyway. But is it feasible to get out of existing ones? There are two elements to PFI payments in most cases. There is the debt interest and repayment of the principal sum owing; paying down the mortgage, if you like. Then there is the payment for whichever services are rolled into the PFI contract. In the case of hospitals, that may well include building and grounds maintenance, repairs, mechanical and engineering maintenance, it may include at least elements of cleaning, security … it is often a long list.

So Corbyn would have to do two things. He would have to find the money to repay the debt – the capital sum still owing. In fact, it could be worse than the apparent sum owing, because the suppliers might well claim loss of profit on the future income stream servicing the debt. (The equivalent of an “early repayment” penalty that you may well face if you try this with your mortgage). With very low interest rates available, the return the providers are getting from PFI is probably well above what they could get elsewhere with the repaid capital amount, so they might have a contractual claim there.

Then the services work rolled into the PFI deals would have to continue. In some cases, the suppliers of those services may have long term contracts with the PFI prime contractor – or they may even be a partner in the PFI vehicle. In other cases, they may be working under more casual relationships. But there would presumably be some sort of gradual re-competition programme with lots of contracts for maintenance and so on coming to market.  Or the NHS would have to recruit thousands of staff to fill those service roles if Corbyn is totally opposed to the use of the private sector.

Two years ago, the New Statesman reported that “NHS hospitals owe £80bn in PFI loan unitary charges – in other words, the ongoing costs of maintaining PFI hospitals and paying back the loans. Next year alone, trusts will make some £2bn in repayments”.

But these services are still needed, and what is clear is that there is no guarantee that any savings would be made for this element of the £2B the NHS spends on PFI contracts every year, which we suspect is at least half the total.

However, the core fallacy with Corbyn’s views of "re-nationalisation" is this. The NHS absolutely and intrinsically depends on the private sector. There are many private providers of actual healthcare services, which it wold be very difficult to replace, then of course pharmaceutical firms are private businesses. GPs – family doctors – are actually private contractors too, as are dentists and many other professionals working in the system. It is just impossible without a genuine Cuban-type socialist (or fascist) revolution to contemplate an NHS free of the private sector.

PFI may have been a mistake in some senses – and we should remember, it did also get some very good new hospitals built – and we are very aware of the shortcomings. But unfortunately Corbyn’s statements show his view of how the country should be run is fantastic, in the original and literal sense of the word.

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