I received the posting below as a comment on Natalie Bennett's NHS speech LINK but I feel it is important enough to be published as a Guest Blog:
What an excellent assessment of the problems facing the NHS, and what
needs to be done to protect it! Thank you for publishing this speech,
Martin.
I write as someone who was diagnosed with Type 1 Diabetes in
my late 20's. My care through the NHS for more than 35 years must have
cost a lot of money, but because of it I was able to continue with a
relatively normal working life, and pay large amounts of income tax and
NIC. That, to me, is the way things should be.
Hopefully, with a
newly-diagnosed Type 1 diabetic in the cabinet, there might be a better
appreciation of the NHS within government, but I won't hold my breath!
I
spent 25 years of my working life as a Tax Inspector, and in the early
2000's had to consider the first accounts of a company which had won a
PFI contract to build a small hospital and provide all of its support
services for 30 years. I was concerned at the odd accounting treatment
of the transaction, which it appeared would guarantee that the company
would automatically make losses (for tax purposes)until the final year,
when it would make a huge profit. The losses each year would be set
against the trading profits of the two large groups which owned the
company 50/50 (one a construction group, the other a major services
provider).
I asked for a copy of the PFI contract, and other
supporting documents, to see whether I could challenge what looked like
artificial tax avoidance, and after a lot of delay and prevarication, I
eventually received them. The contract was about 150 pages long, and
very complex, but effectively meant that the NHS (or hospital trust
involved) would repay the £30m capital cost of the building, plus a
generous rate of interest on the "mortgage" for this amount, over the
thirty years. The company could charge whatever it wanted to (with very
little chance of the NHS being able to challenge the amount) for the
services provided during the thirty years, with no chance of the
hospital renegotiating the contract, finding another provider or taking
the services back "in house".
How had the NHS allowed itself to be
tied up in such a bad contract? Because of instructions from the
government that, in order to encourage private companies to get involved
in PFI projects, it would guarantee to pay their legal and professional
costs of entering into contracts. So, in the case I was looking at, the
NHS had paid £1.5m for the company's lawyers and accountants to draw up
a contract which "stitched-up" the NHS and gave the opportunity for tax
avoidance by the two big groups behind the PFI company (one of which
had a former cabinet minister as its Chairman).
Why were Chancellors
Ken Clarke and Gordon Brown so keen on promoting PFI contracts? Because
it kept the cost of providing major capital projects "off Balance
Sheet" as far as the government's accounts were concerned. They could
claim to be providing new hospitals without this being charged against
their budget deficit, even though the eventual costs of doing things
this way would be much higher (hence NHS Trusts going bust).
I'm
afraid that the Official Secrets Act prevents me from identifying the
hospital and companies involved, or from disclosing the outcome of my
investigation of the accounts, but it was an episode towards the end of
my career in the Inland Revenue that left me frustrated by the actions
of my "masters" in the Treasury!
