Hospital scandal exposes SNP duplicity about private finance – Richard Leonard

Safety concerns have stopped the new Royal Hospital for Children and Young People in Edinburgh from opening (Picture: Ian Rutherford)
Safety concerns have stopped the new Royal Hospital for Children and Young People in Edinburgh from opening (Picture: Ian Rutherford)
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A dogmatic commitment to market-based solutions – by Conservative, Labour and SNP governments – has delivered sub-standard services at inflated prices with the Royal Hospital for Children and Young People the latest example of how badly things can go wrong, writes Richard Leonard.

If ever there was an example of the abject failure of neo-liberal economics in our public realm, it is the new Edinburgh Royal Hospital for Children and Young People. NHS Lothian is handing over around £1.4m a month to private consortium Integrated Health Solutions Lothian (IHSL) for the hospital. Here we have not a decrepit Victorian relic but a state-of-the-art, newly built, 21st-century facility, which is unable to open for reasons of public safety.

It is unthinkable that this new children’s hospital could be ripped down before it even opens, as has been suggested by a senior trade union official. And that is why Monica Lennon, who is Scottish Labour spokesperson for health has called for a public inquiry.

This hospital project has been beset by a number of ailments. The underlying diseases – outsourcing and private finance – are preventable. As a trade union organiser, I fought against the Private Finance Initiative (PFI), and I have said that as Labour First Minister I’ll end it and its successor incarnations because it does not deliver for our public services.

READ MORE: Insight: Cashflow crisis that led to Sick Kids fiasco

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For the Tories in the 1990s, PFI was the next stage of their privatisation journey. For Labour, it became a means to build up our public service infrastructure after years of neglect – off balance sheet – with speed. For the SNP, it was a political opportunity, similar to their promise to scrap the council tax.

When Alex Salmond was campaigning to be First Minister, he said “PFI was a quick fix and a costly mistake”. And if elected, he would ensure “our public assets can be held in trust for the nation all without the unnecessary private profit that is part and parcel of PFI”. Many believed him.

The public perception soon became that the SNP government had abolished PFI. The SNP repeating time after time that PFI was gone. And yet 12 years later, we are paying millions of pounds to a private consortium for a hospital we can’t use. How can this be so?

The hospital is being paid for via the non-profit distributing private finance model supported by the Scottish Government through the Scottish Futures Trust.

For the SNP, this model created the illusion of an alternative. But the truth is that the non-profit distributing (NPD) model has one fundamental flaw – it distributes profits! It has simply leads to the same corporations and the same profit distribution to absentee shareholders which we saw with PFI but just through a different vehicle.

“The political advantage of NPD – that is, its ability to give the SNP Government the appearance of doing ‘something different’ to its more business-oriented southern neighbour, while in reality responding to the same budgetary incentives that gave rise to private finance in Scotland in the first place – also looks set to be eroded,” noted Edinburgh University academics a decade ago. Yet the scam continues.

It is time to draw a line under this, and look at common-sense ways of bringing these private contracts into public ownership. And it is not simply the ownership of these public buildings, it is their maintenance.

The new Edinburgh Sick Kids Hospital had a total contracted cost for IHSL to design, build, finance and maintain the hospital over 25 years of £432m. However, Scottish Labour research revealed that the independent financial experts at Audit Scotland have been investigating the governance oversight surrounding additional payments of £11.6m to IHSL.

The Carillion scandal highlights the failure of our creeping reliance on private contractors to deliver public services. Its “unsustainable dash for cash” took money from pensioners, suppliers and investors while paying out handsome dividends to shareholders. Since its collapse in 2018, it is widely recognised that the model of private provision of public services is no longer, in so much as it ever was, delivering for the people.

For too long, we have paid the high price for outsourcing. The dogmatic commitment to market-based solutions at all costs has delivered sub-standard services at inflated prices. And when they fail, as they often do, it’s the taxpayer who picks up the bill.

For the avoidance of doubt, our public services exist to serve the Scottish public, not the balance sheets of financiers. Scotland needs real and radical change.

For too long this county has been run by and in the interests of a few who are all in it together. It is time to re-balance the scales and bring democracy and accountability back to government, and put power in the hands of the many. By extending public ownership we can do this, with the added advantage that surpluses can be used to reinvest in infrastructure and tackle fuel poverty by keeping energy bills down.

Scotland needs the biggest programme of social and economic reform in the history of the Scottish Parliament, offering a clear alternative to the wasted decade of austerity. And so Labour will not accept the way our economy and society currently works.

It is clear that too much wealth and too much power rests in too few hands. So this is no time to tinker around the edges; no longer can we have business as usual.

We need to do better than this. We have to provide people with hope. Hope that society can be transformed in a way that rewards the real wealth creators.

The hope that we are offering is a promise to do things differently: more equally. We need to change and shift the balance towards a far better deal for the many.

A national conversation to set out what type of society we want to build and how we should pay for it is long overdue. We need a conversation around how to invest in and sustainably develop the Scottish economy, with less market and more planning.

And we need to understand that if we are to avoid the construction of hospitals that cannot admit patients we need to start thinking big and beyond the old establishment politics.

After all prevention is better than cure.