Report 'shows backdoor NHS privatisation'

Spiralling costs of "back-door privatisation" could leave taxpayers contributing up to £24 for every £1 earmarked for lucrative private-sector contracts to run services for British hospitals.

Spiralling costs of "back-door privatisation" could leave taxpayers contributing up to £24 for every £1 earmarked for lucrative private-sector contracts to run services for British hospitals.

In the first comprehensive analysis of private NHS contracts, the bill for contracting-out "minor" services – worth less than £20m each – has already come in at £734m.

But as well as showing the true extent of private-sector involvement in NHS provision, the report reveals that the profit margin being demanded by private firms will force up the "rental" cost of the projects to as much as 24 times their capital value.

Such "mark-ups" include a catering contract for Queen's Medical Centre, capital value £1m, which is expected to cost the NHS £23.8m to finance. Other examples are the North Birmingham Mental Health facilities, valued at £12.4m, which could cost £163.5m; Royal Wolverhampton Radiology, valued at £10.9m, set to cost £70m; Rotherham elderly services, valued at £2.1m, expected to cost £16.9m; and North Bristol Brain Rehabilitation Unit, valued at £4.9m, set to cost £42m.

The research, carried out for the GMB trade union by a health research group, LHE – which uses the Department of Health's own statistics – shows that the total of NHS schemes completed, under construction or on the list for approval between now and 2006 already adds up to £6.4bn. The sums of money committed in terms of annual payments are far larger.

The Department of Health said the figures "misunderstood" the Private Finance Initiative. "You cannot compare capital costs with revenue costs," a spokesman said.

But the Government refuses to make clear exactly how much PFI deals will cost.

According to LHE's report, the combined payments on the six PFI hospitals already running add up to £83m a year, giving a total payable of £2.4bn – six times the capital value of £423m.

The annual fees on the next 14 schemes in the queue add up to £250m a year, a total cost of £7.9bn – five times the capital value of £1,507m.

The report concludes that if these deals were replicated in later PFI schemes, the NHS could wind up paying between £32bn and £38bn in real terms to private companies in the next 25-30 years.

Most PFI deals last 25 years or more. Critics of PFI insist the repayment schemes set up for contracted-out services and the emphasis on profit mean that costs will rocket as the report by LHE claims.

GMB's general secretary, John Edmonds, said: "This shows that the backdoor privatisation of the NHS is already starting to soar out of control."