Two stories that came out on the same day last week should raise concerns about where the BC government continues to go with public private partnerships (P3s).
The government announced it was going to build two hospitals on Vancouver Island in Campbell River and in the Comox Valley. Premier Clark then told the Campbell River Courier-Islander that:
It is going to be a P3,” she said. “We just haven’t announced it yet. So now we’ve announced it. We are planning it as a P3. We’ll see what happens, but that is our plan.
This will make about eight hospitals that BC has built as public private partnerships under the Liberal government.
But the same day as the Premier’s announcement the Public Accounts Committee in the UK came out with one more extremely critical report about the use of P3s. In the UK P3s, the use of private funding for public projects like hospitals is called Private Finance Initiative or PFI.
The Chair of the Committee, The Rt. Hon Margaret Hodge MP, said:
Time and again my Committee has reported on problems with PFI, including the costly contracting process and the prospect of little risk being transferred but high returns being enjoyed by investors. 30 year contracts are inflexible and don’t allow managers to alter priorities or change services that have become outdated. We have even seen evidence of excess profits being priced into projects from the start.
Hodge continued:
The Treasury review must find a private finance funding model that allows flexible delivery of public services and ends the era of investors receiving eye-wateringly high rewards while taking ever decreasing risks.
Private companies benefitting from taxpayer funded contracts must be transparent over the use of public money so that the public can be assured that value is being secured from the investment.
BC’s public private partnership program was based on the UK’s PFI program and has the same problems. The difference is that here, things like details on profits and costs are withheld from the public. In one example where cost information has been made public – Vancouver General Hospital’s Diamond Centre – the P3 cost vastly more than it would have to do the project publicly.
Citizens for Quality Health Care, a North Island group that obtained 19,000 names on a petition to get the two hospitals built, has expressed concerns about the use of a P3 for the project. They want the hospital publicly funded and services publicly delivered. A CQHC release stated:
CQHC remains committed to the position that there are many compelling reasons to ensure that these new hospitals are not P3s.
This stand is based first on the principle that health care in Canada must continue to be publicly funded and publicly delivered, and secondly on the wealth of experience of P3s in the UK, Canada and elsewhere that prove that P3s result in excessive cost, deterioration of care, and loss of control of decision-making.
Eye popping profits. Little evidence risk is transferred. Loss of public control. Lack of flexibility. Deterioration of care. So why are P3s a problem in the UK and not here? The difference is just a matter of timing. Eventually, BC’s government will be forced to release the information it has been hiding on costs and other issues. The fuse has been lit. Who will be in government in BC when these P3s blow up?
Elizabeth // May 14, 2012 at 9:08 pm
We can’t fool ourselves – PFI is a liability
As the man now in charge of the largest PFI-built hospital in England, I know what a millstone it can be
0. Peter Dixon
0. guardian.co.uk, Friday 13 November 2009 16.11 GMT
0. Article history
0.
I have worried about private finance initiatives for a dozen or so years, and now the select committee on economic affairs of the House of Lords is worrying too. Or at least I hope they are. They kindly invited me to give evidence to them, and I repeated what I have been saying consistently but with increasing urgency. PFI is expensive and inflexible. It may have advantages in transferring risk and keeping debt off the public balance sheet, but now that we have discovered that unlimited debt is OK for UK plc in order to prop up failed financial institutions, it is hard to continue to argue that we can’t use public debt to create long term assets – schools, hospitals, affordable homes.
My perspective is probably a unique one. As chairman of the Housing Corporation I tried to avoid PFI wherever possible and use good old cheap loan finance, without government guarantees, to produce increasing numbers of affordable homes. With banking facilities of nearly £40bn available to housing associations at rates that were not far off the price at which the government could borrow (until the collapse of the banking system screwed everything up), there was really no need for the complexity and the cost of PFI. In my other world as chairman of University College London hospitals, we have the largest PFI-built hospital in England to date to contend with. It is a great new building and yes, it was built on time and on budget, but we now have indexed payments for the next 35 years which at a time of growing concern over NHS budgets can only be a millstone.
It isn’t just that our scheme was expensive. Its very existence distorts whatever else needs to happen in this part of London and beyond. And that is before we get to paying for the much larger scheme at Bart’s and the London in a few years’ time. Another problem to which no one has yet found an answer is that the price which we get paid for all that we do is based in part on an average cost of capital throughout England. The cost of capital for hospitals with a large PFI is going to be greater than others with traditional funding. We will always find it harder to produce the surpluses we need to re-invest in our future.
We recently signed a contract for our new ambulatory cancer centre. We were fortunate enough to have part of the proceeds of the old Middlesex hospital and did not go down the PFI route. The issue for us was about how we procured the new centre, and I hope we got it right. If we didn’t, at least we know that it is the fault of my board.
What we need to have in the debate is not sterile argument about ownership. The issue is how we handle our procurements and manage our projects. Let’s face it, if the public sector can’t be trusted to procure a sensible building contract, it certainly can’t be relied upon to procure a successful PFI with a 35-year term. As far as the funding is concerned, we are fooling ourselves and probably no one else if we think that a complex structure to take liabilities off balance sheet now against future payments which to all intents and purposes are guaranteed is the answer. Remember Enron?
Susan McLoughlin // May 12, 2012 at 10:55 am
This news is so common and so discouraging. The effects of this type of initiative – in every sector of our society, are so deleterious and so difficult to undo. It is beyond frustating as a citizen of this country to have so little power to prevent the crushingly stupid and self serving policies of our politicians.