Firm foundations

In the five years since Labour came to power, all but 10 of the
100 new or refurbished hospitals have been funded by the Private
Finance Initiative. Likewise, 500 of the 550 new or cleaned-up
schools have been PFI projects.

Social services departments, on the other hand, seem to have been
somewhat slower to grasp the PFI nettle. Since March 1998, when
Surrey Council’s transfer of 17 care homes plus staff to the Anchor
Trust became the first social services PFI project to become
operational, others have followed in a trickle rather than the rush
seen in the education and health care sectors.

There are several reasons for this. One, of course, is simply a
matter of scale. The kind of capital outlay needed to build a new
school or new hospital is seldom required in social services.
Another is that many social services departments have no need of
PFI’s privatisation by the back door, having already marched boldly
in through the front, transferring assets, housing stock and
services directly to the private sector. It is also possible that
social services departments have been a little more selective in
their approach to funding, choosing PFI when it suits but remaining
open to a variety of other financing options.

One reward for this reticence has been the absence of social
services projects from the catalogue of PFI calamity compiled by
public sector trade union Unison to support its anti-PFI motion at
this year’s Labour Party conference in Blackpool.

Reading through this sorry sequence of building blunders, exploding
sewerage systems and financial miscalculation, it is difficult to
see why anyone in their right mind would want to embark on the PFI
route. Certainly the nation’s accountants do not seem to be
convinced by the policy. In October this year a survey of 200
members of the Association of Chartered Certified Accountants found
that only 1 per cent strongly agreed that PFI provided value for
money. Some 57 per cent of those surveyed thought it would be
cheaper to build new schools and hospitals through public

The government, however, is standing firmly by the policy it
inherited from John Major’s Tory government. Despite losing the
Blackpool vote, the leadership remains unrepentant, with chancellor
Gordon Brown claiming that PFI is the only way to pull in new
investment for Britain’s crumbling public sector.

Hence, when a survey by management consultancy
PricewaterhouseCoopers found that few social services departments
had any plans to make use of PFI funding, the Department of Health
strongly urged directors of social services to reconsider their
financing options.

The response to this request may not have hit the headlines, but it
does indicate that social services are slowly buying into the PFI
vision. Several social service projects are now either in the
pipeline or already up and running.

These include:

  • Westminster Council’s partnership with Care UK Community
    Partnerships to redevelop the Delaware Elderly Resource Centre as a
    110-bed nursing and residential care unit, now reopened and renamed
    Forrester Court.
  • A combined NHS community health service, library and social
    services office launched by Dudley Council in March 2001.
  • A partnership between Harrow social services and the Ealing
    Family Housing Association to provide day and residential care
    facilities for people with special needs.
  • A £35m, 30-year contract between Portsmouth social
    services and Interserve to build, maintain and manage two new day
    care centres and a residential unit.

PFI projects such as these have already improved facilities,
services and staffing levels, according to the Public Private
Partnerships Programme (4PS), a body set up by the Local Government
Association to help local authorities in England and Wales work
with the private sector.

In an analysis of the first four social services PFI schemes to be
signed – Surrey, Dudley, Harrow and Westminster – 4PS concludes
“the facilities for service users and staff within the new or
refurbished buildings have improved considerably, and the long-term
future has been secured for the services covered”.

The PFI process has also allowed social services departments to
develop partnerships within the community, says the report. “In
securing much-needed local facilities, the public sector has
invariably strengthened links with others in the community, for
instance GPs and other public sector colleagues.”

However, the report warns that PFI projects are not to be embarked
on lightly. In particular, local authorities must remain clear
about their objectives and be realistic about the often tortuous
nature of the negotiation process. “It should be appreciated that
the time taken to resolve issues arising in negotiation and the
planning process (some four years in the Dudley scheme) can be far
greater than the time taken to complete the project’s construction
work,” it says.

This is a warning echoed by David Behan, director of social
services in Greenwich, who has just finalised a £21.9m,
25-year PFI deal with a private consortium to provide three
neighbourhood resource centres for older people. “PFI is a very
engineered process, and at times we have felt it’s
over-engineered,” he says. “It’s taken two years of intense
negotiation to reach a financial close.”

Nevertheless, with Greenwich’s care homes for older people, all
built in the 1960s and 1970s and in urgent need of replacement,
Behan felt he was duty-bound to consider every option to improve
the council’s provision of services.

“Like all local authorities, we were faced with what to do with our
homes for older people,” he says. “The homes that we have at the
moment were built in an era when the concept of caring for older
people was very different from what we have now. They were not
built to cope with the level of dependency that is needed today.
The corridors are not wide enough, the rooms are not big enough and
they are not designed to deal with mental frailties and confusion.
It’s also a very difficult environment for staff.”

Of particular concern is the lack of provision for older people
from ethnic minorities, says Behan. “If we look at the population
progression for the future, there’s a huge increase in ethnic
elders. We expect a 167 per cent increase over the next 10

It was, therefore, decided to replace the borough’s crumbling care
homes with three new neighbourhood resource centres. Providing day
care, residential nursing care, respite and short-term care, and
several continuing care beds, the centres will also feature an
innovative joint care agreement with the local primary care trust.
“We made a section 31 agreement with the PCT in which we will
become the lead commissioner for the continuing care beds,” says

In light of the borough’s projected ethnic make-up, one of the new
centres will be aimed specifically at the needs of Asian elders,
while another will focus on the Caribbean community.

To finance the project, PFI was the only option, says Behan, and a
consortium consisting of Ashley Homes – a division of the
Shaftesbury Housing Association – and Kier Project Investment was
chosen as the preferred partner. “We explored a range of other
[financing] models, but this was the only way of levering in the
capital that was required,” he says.

Moreover, because the three centres will replace Greenwich’s
current care homes, Behan claims that the money paid to the
consortium over the next 25 years will be no more than the council
would have spent anyway.

Nor will there be any staff redundancies, pay cuts or loss of
pension rights when council home staff are transferred to the new
centres to be employed by Ashley Homes in 2004 , he claims.

It remains to be seen whether Behan’s vision of a PFI project that
improves services, costs no extra money and respects staff
employment rights will actually come to pass. But like it or not,
PFI does appear to be here to stay. And, so far, social services’
measured approach to the policy seems to be the best way of staying
out of the headlines. For, where PFI is concerned, no news is good

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