New Stobhill Hospital, Glasgow Principal designer: Reiach and Hall Architects
Procured under a bespoke PFI contract, the New Stobhill Hospital is a pioneering dedicated ambulatory care hospital
SUSTAINABILITY
“Any future government will have to provide new hospitals. Seeing as they do not have the money themselves and are not minded to borrow it on their own account, there is going to have to be some kind of off- balance sheet financing taking place.
“To be frank, I think the Conservatives have yet to come up with a structure, but they are clear that private finance will have to be used in some form. There are a lot of ideas in the market that take their cue from PFI but could probably be given different branding.”
Although it seems the reasons for actually using PFI are mainly political, the argument put forward by the government is that the greater cost of PFI is then offset by the greater efficiencies which PFI makes available. Although in theory this should be the case, Mark says that there is little evidence that this actual happens in reality.
“There is a lot of evidence that PFI results in lower cost over runs post contractually, but whether that advantage is significant enough to offset the high cost of finance is an open question. The state of the evidence is not conclusive.”
Another method being used to finance healthcare infrastructure projects is LIFT which is mainly used to finance smaller projects such as GPs’ surgeries.
“In principle, LIFT is based on Jul/Aug 10
the idea of contingent renewal where private sector companies deliver a few GP surgeries for example and then the quality of their work determines whether or not they get access to the next round of contracts.”
The LIFT Council has stated that the method had cross party support; but again it seems that this support is more for political reasons than anything else.
“The only reason that the Tories have supported LIFT is because they believe that it doesn’t have the political baggage associated with PFI and also it is quite a good way of getting GP’s surgeries delivered off balance sheet. It’s not clear whether that support will be sustained in the future, as it is not close to their hearts, and they are likely to pursue forms of marketisation in primary care which may render LIFT in its current form redundant.”
The truth of the matter is, however, that if the government chooses to build new hospitals, it will have to involve some kind of borrowing.
“If the government wants to make a large scale capital investment and their tax receipts are not going to cover it, then they will have to borrow.
“The question is do they borrow directly or through a private sector intermediary? If they borrow through a private sector intermediary then the cost is going to be higher unless you can offset that high cost with other efficiencies that are generated from incentives created by the contractual structure.
“I would say that there is inconclusive proof as to whether that has been possible and if the political parties were honest, they would offer the public authorities a real choice over which type of financing to use.
“This would allow them to choose the method which suited their purposes best. I think, however, that if NHS trusts were not obliged to use private finance, they would do so much less frequently than has been the case.”
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Conservatives have yet to come up with a structure, but they are clear that private finance will have to be used in some form
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