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By a Newsnet reporter

The well-publicised troubles facing South London Healthcare, which is struggling under the weight of its Private Finance Initiative (PFI) obligations, offers a stark warning of the dangers of PFI and the increasingly privatised health system south of the border.

The PFI system was enthusiastically promoted by the last Labour government as a way of attracting private investment into the public sector.  Critics at the time warned that the scheme was merely creating a mountain of unsustainable debt.  The travails of South London Healthcare demonstrate that the critics were correct in their suspicions of PFI.

The NHS Trust faces being dissolved after £150 million of bailouts over the last three years failed to prevent the trust making a loss of £69 million last year.  The South London Healthcare trust was already struggling under the weight of inherited debt, it was formed in 2009 by the merger of three London hospitals which had a combined debt of £69 million.  

The trust is unable to meet the cost of two ruinously expensive PFI arrangements which the UK government entered into in order to fund two new hospitals.  Now the true costs of the arrangements is becoming apparent.

In this financial year alone, the trust will have to find £61m in charges and interest payments on the PFI schemes, accounting for almost 15% of the trust's entire budget.

The trust has now been put into special administration by Tory Health Secretary Andrew Lansley, and may be dissolved if its debts cannot be paid.  It remains uncertain what will happen to local health services in the areas covered by the trust with concerns that the administration and delivery of health services may be contracted out to a private company.  Service mergers and job cuts are likely.

Speaking to the Independent newspaper, a spokesperson for Mr Lansley said:  "Labour turned a blind eye to these problems for years. They burdened [the trust] with two unaffordable PFIs worth £61 million a year and they crippled the organisation with debt from the beginning.

"The standard of care that patients receive at the hospital trust is not good enough, although there have been some improvements in recent months.

"It is crucial that those improvements are not put at risk by the challenge of finding the huge savings that the trust needs to make."

A further 21 NHS trusts in England are at similar risk as a result of their huge PFI debts and are thought to be "clinically or financially unviable" by the Department of Health.  About half of the trusts at risk are in or around London.  It is believed that Barking, Havering and Redbridge University Hospitals NHS Trust and Surrey and Sussex Healthcare NHS Trust are amongst those most at risk of entering administration.

Scotland has its own history of PFI under the previous Labour/Lib-Dem administration, but the schemes were stopped by the first SNP administration when it entered office in 2008.  The structure of the NHS in Scotland remains true to its publicly owned principles.

Commenting, Glasgow SNP MSP Bob Doris said:

"The dire situation facing South London Healthcare is a stark demonstration of the dangers of PFI.

"The SNP has consistently criticised the sustainability of PFI projects, warning of the dangers of situations like the one currently unfolding.

"Health is a classic example how decisions for Scotland are best made by those elected by the people of Scotland, rather than leaving matters in the hands of Westminster politicians.

"Scotland's NHS is already completely independent and remains true to its founding principles. The kind of terrible situation we are currently seeing south of the border could never be allowed to happen in Scotland."

Mr Doris, Deputy Convener of the Health Committee, said that it is the independence of NHS Scotland that offers it protection from what is happening south of the border and that independence is needed to protect other services in Scotland from Tory privatisation.

He added:

"There could scarcely be a greater contrast to the approach south of the border than the New Southern General Hospital in Glasgow, being delivered by the SNP Government entirely from public funds."

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