LABOUR'S prolific use of private financial initiative (PFI) schemes have locked Scottish NHS boards into over £7.6 billion in debt for new hospitals – despite them only having a value of around £2bn.
And, despite the fact that Scottish taxpayers have been paying for the facilities since 1998, they're still on the hook for £3.5bn more.
So, why do they cost so much – and what are PFI's consequences for healthcare?
Why does it all cost so much?
Hospitals work like any other PFI project in the UK – a public authority wants a new infrastructure project, and engages with a group of banks, engineering firms and service providers.
That group goes on to design and build the project, and provides services – like cleaning, catering and maintenance, in the case of hospitals – to the public authority for a stretch of time, usually around 30 years.
Hospitals in Scotland take up just over one fifth of the capital cost of all of the PFI projects in the country, but over a quarter of the debt.
A large part of the difference between the capital cost and debt comes down to the raw expense of fitting out and running a hospital.
Medical equipment isn't included in capital costs, and the standards of cleaning and maintenance are much higher than in other types of PFI projects, like schools or motorways.
These lead to increases in unitary charges for the hospitals – the yearly debt repayments NHS boards are required to pay by their contracts.
In addition, most parts of the unitary charge are subject to inflation, meaning health boards in some cases are being required to pay more than they had anticipated at contract signing.
The immense size of the price tag for PFI hospitals is another matter.
Academic literature about the topic suggests that the consortiums that built PFI projects across the UK booked excessive returns on investment into their healthcare bids throughout the 2000s.
Or, to put it another way – little stopped them from putting into their bids as much profit as they wanted.
Why is PFI bad for healthcare?
Professor of Accounting Anne Stafford at the University of Manchester said that the intersection between PFI and healthcare leads to several areas of difficulty.
She cited cleanliness in PFI hospitals as an example, saying: "The public sector had a lot of problems with the private sector."
"There is a perception difference between what is a clean hospital room from a private sector perspective and what is a clean in a public sector, clinical, medical perspective.
"That created a lot of tension, and a lot of additional cost."
She also said that PFI contracts for healthcare facilities often have incentives that put the NHS and the private firms servicing the hospitals at odds.
"The contract [for a PFI hospital] is meant to specify what happens when things go wrong.
"But it's really difficult for the public sector to impose penalties on the private sector to get money back if things are going wrong.
"And certainly with hospitals, the public sector isn't really interested in that type of negotiation.
"They want to have a good clinical environment for them to carry out their medical duties, whereas the private sector is more concerned about working to the contract. So you've got this conflict of interest."
In the worst case, these incentives can put lives at risk.
The lessons of the Royal Infirmary of Edinburgh
One example of what can happen when PFI meets healthcare is the case of the Royal Infirmary, in Edinburgh.
With procurement starting in 1998, it was one of the very first PFI projects in the UK.
Since it opened, the problems have been regular – with some issues being baked in from day one.
The design of the hospital neglected to include air conditioning, an issue that brought staff at the site close to strike action several times over.
Maintenance issues have also plagued the facility, with deficiencies in the building's fire alarms, safety doors and cladding leading to seven enforcement notices by the Scottish Fire and Rescue Service.
In one incident particularly striking incident, amid a string of power outages in 2012, surgeons were left to complete an operation by torchlight.
At the time, NHS Lothian's executive director struck out, saying: "We have reached the point where we can no longer tolerate the repeated, serious and potentially life-threatening nature of these incidents at the Royal Infirmary of Edinburgh by our PFI provider Consort.
"Patient safety is always our absolute priority and we will not allow that to continually be put in danger by a third party."
Despite this, and some contract renegotiations which saw NHS Lothian take on some of the service provision at the hospital, Consort is still heavily involved in the running of the Royal Infirmary of Edinburgh.
Even though it had an initial capital value of just £180m – a paltry sum – by the contract's end in 2028, NHS Lothian will have paid almost £1.2bn for the hospital in unitary charges.
And, even then, the health board's payments won't be over, as a clause in the hospital's contract means that NHS Lothian will have to pay millions, if not tens of millions of pounds, to take the hospital into public ownership in 2028.
