1. Edmonton, Feb 13 TH 2014 LESSONS FROM THE UK: EXPERIENCES OF P3S AND PRIVATISATION Allyson Pollock, Professor of Public Health Research and Policy Centre for Primary Care and Public Health Queen Mary University of London

2. British Welfare versus Nazi Warfare

3. ‘The abolition of want before the war was easily within the economic resources of the community: want was a needless scandal due to not taking the trouble to prevent it. Will Beveridge, 1942 3

4. PrestonMarch20134

5. The aim of this plan for Social Security and allied services is to abolish want by ensuring that every citizen willing to serve according to his powers has at all times an income sufficient to meet his responsibilities. Social insurance, children’s allowances and allied services, eg, health, education and housing are primarily methods of redistributing wealth. Beveridge, 1942 PrestonMarch20135

6. Health and Social Care Act 2012 Abolishes the NHS in England End of Duty on Sec of State to secure and provide health care for all New discretionary powers for providers to determine what services are provided and what will be charged for PrestonMarch20136

7. Four stages of NHS privatisation Phase IEfficiency & management 1979control moves away from professionals Griffith’s supermarket management reforms Phase IIInternal market 1991 purchaser/provider split public corporations REVERSED IN SCOTLAND, NHS REFORM (SCOTLAND) Act 2004 1998 Phase IIIPFI - PPPs 1992 privatise asset base & non-clinical services Phase IVNHS Plan 2000privatise clinical services- foundation trusts pricing- financial flows, DTCs etc local pay bargaining - GP/ consultant contracts service unbundling- like post office Phase VRemove Duty to secure and provide:

8. PrestonMarch20138 Service unbundling: UK NHS pharmaceuticals - services dentistry ophthalmology long term care ancillary services - eg, catering cleaning laundry PFI infrastructure hospitals premises buildings maintenance ‘soft’ clinical services - pathology radiology medical records GPs nurses & doctors clinical & non-clinical - equipment

9. PFI: Lessons from the UK NHS PFI : a discredited Public Policy Affordability VFM: cost and time overruns Accountability Cost of finance NorwayJune20139

10. NHS Hospitals 159 PFI hospitals Capital value 13.6 billion (2009-10) Aggragate of all PFI availability payments is 42.8 billion (2009-10), service charges 30.7 billion (2009-10) NorwayJune201310

11. NorwayJune2013 £191.3 billions £34.7 billions £191 billions Source: HM Treasury (2008). Signed Projects List (March 2008). Available at: http://www.hm- treasury.gov.uk/ppp_pfi_stats.htm (Accessed: 24 November 2008). 11

12. NorwayJune201312 Loss of Monitoring the true costs of PFI Data issues 1.No account of additional contributions to PFI schemes - land sales and receipts, NHS capital, Treasury “smoothing mechanisms” 2.PFI payments not broken down by sector 3. PFI payments do not provide split between FM and availability - therefore disguise true cost of capital 4. Inconsistent definitions of PFI estimates of capital (capital not defined) 5. Revisions to contracts and payments not provided

13. NorwayJune201313 Annual revenue implications of capital costs for 19 PFI hospital schemes comparing costs before and in the first year in which the PFI scheme is operating: ring fenced charges 12.45.3Worcester Royal Infirmary 12.56.2 University College London Hospitals* 12.88.3The Dudley Group of Hospitals* 13.13.4Calderdale Healthcare 13.25.6South Tees Acute 14.63.8Hereford Hospitals 14.74.0Carlisle Hospitals 15.59.3West Middlesex University Hospital* 16.22.1Greenwich Healthcare 16.43.8Swindon & Marlborough 32.76.7Dartford & Gravesham After PFI (Capital charges + Availability fee as % of projected income in 1st year of operations) Before PFI (Capital charges as % of income 1998-9) NHS Trust All calculations include payments to Treasury on existing and retained estate. * Refers to 1999-2000

14. NorwayJune201314

15. NorwayJune201315 Changes in bed numbers at NHS trusts under PFI development Values are average no’s of beds available daily (all specialties) (-30.8) (-5.2) Percentage change from 1995-96 5,5837,6348,063Total 484566660Greenwich 465507506Carlisle 250384397Hereford Hospitals 535732745South Buckinghamshire 390699697Worcester Royal Infirmary 7361,2381,342South Manchester 8091,0081,120Norfolk & Norwich 454597665North Durham Acute Hospitals 400506524Dartford & Gravesham 553772797Calderdale Healthcare 507625610Bromley Hospitals Planned1996-971995-96Trust

16. NorwayJune2013 Loss of control over planning ‘Unattractive economics’ “An incremental investment of £200m might require productivity improvements leading to perhaps 1,000 job losses which might be significantly greater than 25% of the workforce … [This] is probably only achievable by reducing the numbers of doctors and nurses … in the local health care market.” PFI Futures March 1998 Newchurch & Co 16

17. NorwayJune201317 “The involvement of private finance in taking on performance risk is crucial to the benefits offered by PFI, incentivising projects to be completed on time and on budget, and to take into account the whole of life costs of an asset in design and construction.” HM Treasury. PFI: meeting the investment challenge July 2003

18. Treasury Committee report Aug 2011 Main benefit claimed was transfer of construction cost risk. However in a PFI contract which lasts 30 years it is not necessary to transfer that risk No convincing evidence..that PFI projects are delivered more quickly and at lower out- turn costs than projects using conventional procurement methods.. NorwayJune201318

19. Treasury Committee 2011 Increase in private finance costs mean that PFI financing method is now inefficient We are concerned that VfM appraisal system biased to favour PFI Some of claimed risk transfer may also be illusory NorwayJune201319

20. Treasury committee on Public Expenditure Rules Efforts to meet fiscal rules at national and European level may have contributed to misuse of PFI Lack of capital and Departmental Expenditure Limits … have encouraged and may encourage poor investment decisions… …… NorwayJune201320

21. Commercial contracts “Contracts [….] have an important function in specifying the risk-sharing arrangements that apply in the face of unplanned events on either the purchaser or the provider side. In short, contracts are a means of steering transactions and sharing or allocating risk.” NorwayJune201321

22. NorwayJune201322 “There is a cost to the Government’s use of private finance, involving the extra cost of the private sector securing funds in the market, but a great part of the difference between the cost of public and private finance is caused by a different approach to evaluating risk.” HM Treasury. PFI: meeting the investment challenge July 2003

23. NorwayJune201323 “We have sought on a number of occasions to gain an understanding of the relationship between the returns which contractors earn from PFI projects and the risks they actually bear. At present the available information is limited and rather mixed…” Select Committee on Public Accounts. PFI construction performance. 35th report, session 2002-03

24. NorwayJune2013 Source: Response to Scottish Futures Trust Consultation Paper by Jim Cuthbert & Margaret Cuthbert March 2008 www.cuthbert1.pwp.blueyonder.co.uk/ Projected Dividends on Six PFI Projects Equity Input (£m) Projected Dividends (£m) New Royal Infirmary Edinburgh 0.5167.9 Hairmyres Hospital0.000189.14 Hereford Hospital0.00155.671 24

25. NorwayJune201325 How PFI contracts obscure the audit trail PFI contracting makes it difficult to identify who bears risk PFI firms are shell companies that do not bear risk but pass it on to others through sub-contracts The main providers of private finance are heavily protected from risk Commercial confidentiality used to conceal contracts

26. NorwayJune2013 glasgow sep 29th 2010 Export of PPPs / PFI to Africa The Governments of South Africa, Uganda, Botswana, Tanzania, Mozambique, Nigeria, Kenya, Egypt, Senegal, Morocco, Malawi and Mauritius are all at various stages of setting up specialist units to promote greater use of PPPs and pFI in infrastrucure. Source: The Infrastructure Consortium for Africa: Annual Report 2007. (The ICA was launched by the G8 in 2005. Members are amongst others the G8 countries, the World Bank Group, the African Development Bank, the European Commission and the European Investment Bank.) 26

27. “Portugal: one of largest PPP programs in the world, cumulative investments about 20 percent of current GDP, or about 13 percent of GDP of depreciated investments. NorwayJune201327

28. ORGANISING PRINCIPLES OF 1948-1990 NHS Redistribution to achieve universality and equity Area based structures NOT insurance pools or members Free at point of delivery Public ownership, control and accountability Integration

29. ORGANISING PRINCIPLES OF MARKETS Risk Selection and Risk Avoidance Risk identification Risk prediction Risk pricing: the PREMIUM the market charges for bearing the risk Risk Allocation Risk transfer through commercial contract

30. Externalising risks Risk Selection: denial of care, deselection of services and patient services Loss of coverage, time limits, entitlements shrunk Increased cost : administration, fraud,profit Overtreatment and inappropriate treatment Loss of innovation Rising Inequalities

31. Risk Selection/Avoidance Strategies Gaming and upcoding Cherry picking Cream skimming Dumping Restricting entitlements Risk sharing: coinsurance, user charges

32. US Health Insurance Coverage Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January—March 2011 by Robin A. Cohen, Ph.D., and Michael E. Martinez, M.P.H., M.H.S.A., Division of Health Interview Statistics, National Center for Health Statistics

33. Medical bill/debt problem 17.7 million 10% Cost-related access problem 25.9 million 15%. Source: S. R. Collins, J. L. Kriss, M. M. Doty, and S. D. Rustgi, Losing Ground: How the Loss of Adequate Health Insurance Is Burdening Working Families: Findings from the Commonwealth Fund Biennial Health Insurance Surveys, 2001–2007, The Commonwealth Fund, Aug. 2008. Adequate coverage and no bill or access problem 61.4 million 35% Uninsured anytime during the year 17.6 million 10% Medical bill/debt and cost-related access problem 54.4 million 31% 177 million adults, ages 19–64 Millions are Uninsured and Underinsured

35. Estimated sources of excess costs in US market system of health care (2009) (US Institute of Medicine report, 2012) (Total spending at 2009: $2.9 trillion; 50 million Americans cannot get health insurance)

36. PRIVATE SECTOR EFFICIENCIES? LOSS OF COVERAGE TRANSACTION COSTS: BILLING, INVOICING AND MARKETTING PROFITS AND RETURNS TO BANKERS AND SHAREHOLDERS OVERTREATMENT UNDERTREATMENT LOSS OF INNOVATION