Carillion has showed how disastrous public-private partnerships are in the UK. But this government is exporting them abroad as well. Jenny Nelson writes
The UK’s health service is, yet again,suffering a massive winter crisis, waiting times soaring to a nine-year high – so much so that 55,000 non-urgent operations have been cancelled earlier this month to relieve pressure. To add to the pressure, Carillion, a major private provider to the NHS, has now gone bankrupt, leaving questions over who will now provide vital cleaning and maintenance services and over the future of several major hospital construction projects.
The crisis in the National Health Service (NHS) has been created by a mixture of government underfunding and privatization and marketization of services, which have left services fragmented and profits diverted out of healthcare. On the front line, while attempting to come to terms with government cuts, hospitals are also watching their limited finances bleed out to repay gargantuan debts to private companies.
These are a result of disastrous ‘Public Private Partnerships’, or PPPs. And now the UK government is trying to export them overseas.
PPPs are private finance schemes through which a private company would build a public building, using private loans, and then rent it back to public authorities over several decades. They were originally encouraged as a way of getting public spending off the government’s debt books. But they have proved to be disastrous, not least because investment from corporations involves borrowing at much higher interest rates compared to government borrowing.
One UK hospital trust (Barts Health, in East London) received an initial private sector investment of £1.1 billion, which has left the public sector on the hook to pay six times more – £7.2 billion – between 2007 and 2048. Even with such a lucrative contract, the private entity that built the hospital demanded changes to make the contract more ‘affordable’. Eventually, the Royal London Hospital was finished, but the top two floors were mothballed, inaccessible to the trust and patients.
The UK government continues to have a policy for new PPPs in the UK, known as PF2 – in 2010-2015, four new health PPPs were agreed, with an investment value of £1.1 billion (down from 62 health PPPs with a value of £8.5 billion from 2004 to 2009).
Now many government ministers have condemned the so-called ‘Public Private Partnerships’ (PPPs). ‘In other countries this would be called looting, here it is called the PPP,’ said Boris Johnson after spiralling costs on a London Underground scheme while he was the Mayor of London.
Worryingly, such schemes are now being actively promoted by Boris Johnson’s Foreign Office to impoverished countries around the world. Research by the Jubilee Debt Campaign has found that the Foreign Office is one of four UK government departments touting private funding for healthcare to countries like Zambia and Liberia, putting them at risk of unjust and unpayable debts.
In Peru, the UK’s Foreign Office ran a project to ‘use UK experience of Public-Private Partnerships in the health sector to develop the PPP framework and tendering process for health projects in Peru.’ The project was funded with UK aid money.
Two hospitals subsequently opened in Peru with a reported total investment of $126 million. There were two sets of payments for construction costs – $11.1 million a year for 15 years then $9.8 million a year for seven years. This works out at an average equivalent interest cost of 11.1 per cent – whereas the Peruvian government is able to borrow at 6 per cent interest through dollar denominated bonds.
This week a petition has been brought to the UK’s Department for Health, calling on them to immediately halt the promotion of this flawed model to countries in the Global South.
Campaigning groups around the world are also rallying to expose the scandal. This winter 146 civil society organisations launched a manifesto to demand that Western governments, the World Bank and other development banks stop prioritizing PPPs over traditional public borrowing to finance social and economic infrastructure and services.
‘Until relatively recently, PPPs were largely confined to developed economies,’ says María José Romero of the European Network on Debt and Development. ‘But now they are being aggressively pushed onto countries in the Global South as the answer to development finance shortfalls.’
This dangerous trend means the very countries which are already most vulnerable to debt and most in need of development aid are saddled with expensive, high risk, undemocratic and unaccountable projects. It’s the reason why a new hospital in Lesotho, for instance, has cost three times more than the one it replaced and has swallowed up a quarter of the country’s health budget.
Illustration: Martin Rowson / Jubilee Debt Campaign. Banner photo: Queen Elizabeth Birmingham, a hospital rebuilt through the PFI scheme. Chris Allen, Creative Commons