Interserve – One of the HUGE Private Bidders for Weston General Hospital and a PFI Expert

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August 5, 2013 by Protect Our NHS

Interserve PLC

To misquote The Hitchhiker’s Guide to the Galaxy: “Interserve PLC is big. Really big. You just won’t believe how vastly, hugely, mind bogglingly big it is.” Its five man – and I mean man, of course – board takes combined salaries of a smidgen under £3m but, with a group turnover of £2bn, this is unremarkable.

They say:

Interserve plc (Interserve) is a UK based support services and construction services provider. The company carries out advising, designing, constructing and providing support services for specialist fields with range of plant and equipments. The company caters its services to various sectors including aviation, defence, health, industry, central and local government, commerce, education, justice, highways and infrastructure. Interserve offers services for various types of infrastructure and building such as schools, hospitals, shopping centres, offices, airports, bridges, industrial plants.

We say:
Interserve will build anything big anywhere for pretty much anybody. From recycling plants in Glasgow to shopping centres in Edinburgh to hospitals like the North Cumbria Universities Trust – the first major hospital PFI build. And here’s the thing, Interserve manages one of the largest PFI (see below for an explanation of PFI) portfolios in the UK, having “invested £39.5 million on health projects alone and having been instrumental in raising some £1.5 billion of funding for the health sector.”

They say:
Delivering efficient services in healthcare
Interserve has been delivering services to healthcare environments across the NHS and private sector for over 20 years. Our understanding of the sector spans acute, primary and social care, mental health and rehabilitation.

We take the time to understand our healthcare customers and the external influences affecting them – changes such as demographics, clinical development and shifting government policy. By putting healthcare first, we provide solutions, which enhance the patient experience, improve efficiency and deliver increased value for money across healthcare economies.

We say:
That is something of which to be proud. But let’s look a bit closer at the Cumberland Infirmary, now grandiosely renamed (as they reported above) the North Cumbria Universities Trust Hospital which has the carefully spelt acronym of NCUT.

They say:

The hospital has gone from “strength to strength” over the last decade, with facilities and equipment maintained and kept up-to-date through PFI. The trust benefits from a great relationship with its PFI partner and continues to work closely together to keep the facilities in the best condition possible and also to make sure that the health service receives the best value for money. (Alistair Mulvey, NCUT’s finance director and deputy chief executive)

UNISON says:
The PFI scheme led to reductions in the number of beds at the hospital. The total number of beds in North Cumbria fell from 834 before the hospital was built, to 729 afterwards. (Peter Doyle, regional UNISON official for Cumbria). The union claimed that the first 11 hospitals built under the PFI scheme would amount to 3,800 fewer beds.

PFI

People often associate Public Finance Initiatives so closely with the Blair/Brown, New Labour project that they forget that the first PFI was carried out by the Conservatives under John Major. In essence it’s a Government accountancy scam designed to keep big spending projects ‘off balance sheet’ and so make the government of the day look more parsimonious than it really is. In some ways it is similar to taking out a mortgage to buy a house. The PFI provider puts together a consortium of companies to provide cash to the government for a big capital project and the government pays off this cash advance over thirty years. Once again I turned to Wikipedia for a quick, simple overview and learned that the typical PFI provider is a special purpose vehicle (SPV) organised into three parts or legal entities: a holding company (“Topco”), a capital equipment or infrastructure provision company (“Capco”), and a services or operating company (“Opco”). The main contract is between the government department or local authority and the Topco. Requirements then ‘flow down’ from the Topco to the Capco and Opco via secondary contracts. Further requirements then flow down to subcontractors, again with contracts to match. Often the main subcontractors are companies with the same shareholders as the Topco – or in simpler language, subsidiaries.

And this, dear reader is how private companies build and finance hospitals and then lease the sites back to the NHS. There’s nothing particularly unusual in deals like this – hotel chains are often structured the same way and involve the brand owner (e.g. Hilton) the builder and the operator. But then hotel chains aren’t using public money and aren’t dealing with sick people who are in need of urgent care.

As NCUT was the first to be built under the PFI initiative, it was proudly opened in April 2000 by Tony Blair. Within a very short while, though, as we have seen above, questions were being asked. High on the list of questions was one familiar to all those who have witnessed the way in which private corporations operate in the public sector. Hospital staff blamed the PFI because under the agreement with the private company, there were constraints on making any structural changes while any internal changes cost a lot of money to carry out.

But that’s precisely what happens when in-house government lawyers go up against the top legal minds retained by corporations like Interserve. Yes, the contract looks as if they are both working together, but one tiny change in the continuing operation of the project and you find you’re paying £50 to change a light bulb or £137 for the mind numbingly simple task of re-processing an invoice. (I have the source for this last figure, and it is one of the companies bidding for the Weston General Hospital franchise, but I have promised to keep the source protected)

So the hospital cost £67m to build (Interserve Accounts) and in first year of operation DoH figures show that the trust paid back £12.4m. By 2011, with inflation and thanks to the structure of the PFI deal, that bill was just over £18m (some 8% of the current £220m annual turnover). In the final year of the 30-year contract, in 2029/30, the annual bill is expected to exceed £25m. This means over 30 years, the trust will have made total payments of £587m. Each payment includes the repayment of capital, interest on the loan, and services such as maintenance and updating equipment.

Slide1

Local people (they’re the ones who have to go to hospital if they are ill – you know – the ones that management and government would prefer to think of as users or customers, but we call PATIENTS) started to get royally pissed off, as this excellent letter to the Whitehaven News in 2011 demonstrates so aptly.

SIR,
When West Cumberland Hospital was a separate entity it didn’t have financial problems, as least not as far as we know.

It was only the advent of the PFI- funded Cumberland Infirmary in 2000 and the creation of North Cumbria University Hospitals NHS Trust that the problems started. More than one member of the nursing community at WCH realised that once the Cumberland Infirmary was up and running it would be the beginning of the end for West Cumberland Hospital!

Staff at WCH do an excellent job, despite the fact that the hospital is being robbed blind by the above mentioned trust. Trust? Ha! The dictionary definition of ‘trust’ is this: “A person or organisation in which to have confidence”. Can anyone put their hand on their heart and say they have confidence in this Trust?

Where did the university label come from? There wasn’t one in Cumbria at the time. Why North Cumbria, when West Cumberland Hospital is, as the name suggests, in West Cumbria?

Ask any member of staff, those with some time in, and they will tell you that WCH has been propping up the PFI Cumberland Infirmary since it opened, and it still is!!

Tony K
Whitehaven

{http://www.whitehavennews.co.uk/letters/you-say/no-faith-in-a-trust-which-has-left-our-hospital-propping-up-another-1.904457?referrerPath=home}

But Interserve’s profitability isn’t affected. Just look at the summary of their most recent publicly available financials.
Slide1

Highlights
• Strong future workload up 12.5 per cent to £6.3 billion, as at 31 December 2012 (FY 2011: £5.6 billion) and £2.7 billion of new business won in the year
• Strong operational performance: underlying headline EPS up 8.0 per cent and dividend up 7.9 per cent
• Three year rolling average operating cash conversion of 116.8 per cent (2011: 155.3 per cent)
• Strong net cash position of £25.8 million
• Extended and secured long-term banking facilities
• Capacity of more than £250 million available to fund strategic growth opportunities.

Strategic highlights
• Realised £174 million of value from our PFI portfolio of which we have:
a. Invested £67 million, acquiring businesses in growth markets (frontline services, oil and gas)
b. Transferred £55 million into the pension scheme
• Organic expansion into new sectors (e.g. energy from waste, justice)
• Geographical expansion (e.g. Saudi Arabia, Chile, Panama)
• Developed plans for the imminent launch of SustainAbilities to transform our approach to social, environmental, and knowledge sustainability.

Did you spot that? Strategic Highlights first bullet point, sub clause a: Interserve realised £174m of value from their PFI portfolio in 2012. Nice work if you can get it and Interserve certainly gets it. It doesn’t just drop into their laps though – they lobby for it – and not just for health but for all their other commercial interests. Nothing wrong with that, of course, and it helps when your chairman sits in the Lords and is ever so well connected doesn’t it?

Norman Roy Blackwell, Baron Blackwell

Roles
• Baron Blackwell [2] House of Lords
• Director [3]
LLOYDS BANKING GROUP PLC 1 Jun 2012 –
Non-executive Director, Lloyds Banking Group plc [Parliament interest id: 9983]
• Director [4]
SCOTTISH WIDOWS GROUP LIMITED 1 Sep 2012 –
Chairman, Scottish Widows Group Ltd (insurance subsidiary of Lloyds Banking Group plc) [Parliament interest id: 9984]
• Director [5]
INTERSERVE PLC 1 Sep 2005 –
Chairman, Interserve plc (support services) [Parliament interest id: 1415]
• Director [6]
CENTRE FOR POLICY STUDIES LIMITED 6 Jun 2000 –
Non-executive Board Member, Centre for Policy Studies [Parliament interest id: 1419]
• Director [7]
HALMA PUBLIC LIMITED COMPANY 29 Jul 2010 –
Non-executive Director, Halma plc (specialist technologies for safety, health and environmental protection) [Parliament interest id: 6633]

So apart from the jolly useful business and banking connections it’s good that he takes his many jobs so seriously that he sits as a non exec director of the Centre for Policy Studies, which is, as you may know, not known for its left wing leanings.

But back to the lobbying: the very useful website http://whoslobbying.com/uk/interserve lists the following meetings:

July 2010
Dept. for Work and Pensions
• Interserve Developments met with Chris Grayling, Minister for Employment, to discuss Work Programme

December 2010
Dept. for Business, Innovation and Skills
• Interserve met with Edward Davey, Minister for Employment Relations, Consumer and Postal Affairs, to discuss procurement

July 2011
Dept. for Business, Innovation and Skills
• Interserve met with David Willetts, Minister of State, to discuss education and skills, along with 32 others. [2]
• Interserve met with Vincent Cable, Secretary of State for Business, Innovation and Skills, to discuss education and skills

And please don’t forget the lobbying scandal that threatens to engulf all parties in this sleazy parliament. Over 200 parliamentarians (Lords and MPs) have recent past or present financial links to companies involved in healthcare and ALL were allowed to vote on the 2012 Health and Social Care bill, turning it into an Act. Shame on them.
(http://socialinvestigations.blogspot.co.uk/2012/02/nhs-privatisation-compilation-of.html?m=1).

Summary

There is no scandal or impropriety attaching to this huge and successful company and good luck to them in the building of their waste and recycling sites, but do you really want vast multinationals like this involved in our NHS? Do you seriously believe that there is any motive here beyond profit? Oh I know they can point to their policies which say:

We demand and maintain high ethical standards in carrying out our business activities. We tolerate no form of corrupt practice and consider harassment of any employee for any reason to be unacceptable. We regularly review our policies to take account of developments in legislative and business environments. (http://www.interserve.com/)

But I also know that these companies live and die by the contract and exact and exacting adherence to the letter of all contracts means that when something goes wrong in a hospital and needs to be sorted out, it is not going to be the massive multinational corporation that finally picks up the tab; it is going to be us, the suckers, the ‘little people’ of billionaire Leona Helmsey’s immortal quote: ‘only the little people pay taxes’. It is us who foot the bill, but worse, far worse than that, it is the patients who suffer most when there isn’t a bed for that acute operation, when the grinding pain in your hip won’t let you sleep, let alone stand, or the shortness of breath worsens to a bubbling in your lungs and heralds another day, another week, another month of agony and suffering, while the profits of the giant corporations tick up and their shareholders rejoice in their acumen in having invested in such successful companies.

Patients Before Profits

Keep Weston General Hospital in the hands of an existing NHS Hospital Trust

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“That’s the standard technique of privatization: defund, make sure things don’t work, people get angry, you hand it over to private capital.” Noam Chomsky

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