These PFI hospital deals are a huge rip-off, according to the King’s Fund.

The PFI hospital for Ludlow is no exception. It is heralded as a £27m project. On the face of it, that’s a huge blowout in the current climate. But the reality is far less ambitious.

£27m is the total bill to the taxpayer over 25 years. The actual capital outlay on building the hospital could be as low as £6m. The rest of the £27m will be squandered on interest charges payable over the next quarter century. It’s a bum mortgage deal, with interest charged at a punitive 9 or 10 per cent AER.

In the good old days, local authorities raised money for public works programmes through the issuance of municipal bonds. These were very safe investments, and local folk were happy to subscribe since it was a win-win for them. Investors earned a small but assured yield on their capital, and this was used to build a hospital for the local community. Capital was repaid in full through the collection of rates and local revenues.

Then the sticky-fingered bankers moved in, and the municipal bond was pushed out in favour of PFI.

What will Ludlow actually get for £6m? Not a lot. Up to £2m has already been burned in “consultation costs”. And the bill for land acquisition at the “ecopark” will eat even further into the building capital.

Whatever is left in the kitty will probably build no more than a modest health clinic. When complete, this will be seen a stark example of downsizing. The town’s two surgeries and hospital will go. The three prime town centre sites on which they stand today will be sold for peanuts for residential development at a time that housebuilders aren’t building a thing.

Someone who works in a PFI-built hospital in another region explained how the PFI building maintenance charges are a swindle, too.

He gave me an example in his own hospital. He showed me to a cupboard on his PFI hospital ward. It was quite a small cupboard, barely 8′ x 5′. It was originally built for storing cleaning chemicals but managers had decided to convert it to a blanket cupboard by fitting some shelving into it.

Under the PFI contract, the shelving had to be fitted by the hospital owners, the PFI owners. That shelving cost the taxpayer a staggering £4000. We estimated that a local carpenter would have charged no more than £150 for the same job.

Ludlow has been sold down the river. Those who claim this PFI deal is a bonanza for Ludlow either can’t do the maths or are set to profit from it.

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