Still learning the lessons of PPP

Nearly thirty years after John Major’s government introduced the Private Finance Initiative (PFI), it is astonishing that we are still writing about and using this failed model of delivering public services.

Today, we are reminded by Audit Scotland, yet again, of the costs of using this model. It has been modified and rebranded many times over the years. In Scotland, the SNP government calls it Non-Profit Distributing (NPD) and the Hub Initiative, but these all come under the broad heading of Public Private Partnerships (PPP). In May last year, they announced another rebranding with the Mutual Investment Model (MIM). Another PPP scheme with many of the same problems, as is well covered in a recent Common Weal report.

I and others have written thousands of words on why this model doesn’t work. This archive page on the UNISON Scotland website covers many of my earlier publications. It reminds me that I even used to write a regular briefing called ‘PFI Illusion’. I have to say I didn't expect to be making the same points all these years later. Most recently, in Stockholm a couple of weeks ago. 

I first became interested in PPP as a union organiser covering Lanarkshire Health Board in the 1990s. Two of the three acute hospitals were to be financed by PFI, and I recall a meeting with Lanarkshire MPs explaining why this was a bad idea. Particularly to John Smith MP, who as the MP for Monklands was likely to be the loser because his hospital didn’t have ring-fenced PFI funding.

The fact that PPP schemes are more expensive is not disputed as it once was. As today’s report reminds us even the SFT accepts this:

“The SFT calculated in April 2019 that the lifetime costs (construction cost, ongoing maintenance, plus repayment of borrowing) of NPD and hub private finance projects signed under the pipeline approach were on average about 2.9 times the construction cost of the assets. This compares with lifetime costs of 1.5 times the construction cost when using capital grants and between 1.9 and 2.6 times the construction cost when using public sector borrowing.”

The costs are higher than this as the Audit Scotland report also confirms: "The Scottish public sector is contracted to pay a total of £40.1 billion in annual payments between 1998/99 and 2047/48 under current PFI, NPD and hub privately financed contracts. This is over four times the capital value of the assets developed”

There are also plenty of other risks and problems associated with PPP schemes as the Edinburgh Sick Kids Hospital, and the collapse of Carillion has highlighted. As today's report also concedes projects that involve technology, legislation changes or complex service delivery are unlikely to be suitable. In practice, very few public services remain static for the 25-40 years of a typical PPP project.

The report also points to the reason governments of all colours have persisted. Devolved administrations have always had limited borrowing powers and therefore keeping borrowing off the public balance sheet is attractive. Few Scottish Government ministers in the early years of devolution thought PFI was a good idea, but it was in the parlance of the time, 'the only game in town'.  The Scottish Government now has much higher borrowing powers, which is why it uses PP less, but still insufficient for its capital programme. Hence the new MIM scheme, which they hope will keep these new schemes off-balance sheet.

Even the Tories have given up on PFI, not least because they can borrow very cheaply and they recognised that the projects were not delivering value for money. The solution for Scotland to go the same way is to give the Scottish Government prudential borrowing powers, ending the current limits. That would end the chase for off-balance-sheet financing and invest the savings in our crumbling infrastructure.

Passing on the Scottish healthcare experience

I am in Stockholm this week talking about health and care systems. Sweden has a healthcare system which is generally free at the point of use. However, there is greater local autonomy at the regional level than in the NHS and is increasingly adopting market-based systems with private sector providers, particularly in Stockholm.

Privatisation is being challenged in Stockholm, and I was invited to speak at a seminar to explain the Scottish experience. We moved from a command and control NHS model, to the internal market and now to a collaborative system. Having tried the market for around 15 years, they are interested in our experience and why we changed in the years after devolution. And why we have retained the model despite privatisation in England.

International comparisons in healthcare are notoriously difficult, and my approach is to explain the Scottish system, rather than suggest it should or could be copied directly. While Sweden starts with universal health care, the health challenges are very different to Scotland with our massive health inequalities. If only we had their more equal society, even if they are rightly concerned that the post-war gains are being eroded.

On systems, we can offer some relevant experience. The local newspaper was interviewing me outside a large new hospital built with private finance. Unsurprisingly, they have already discovered the cost of these projects and the creeping privatisation that comes with them. Scotland didn't have the cheap borrowing powers when most of our PPP hospitals were built. So why a country like Sweden, which can borrow for next to nothing would want to pay private sector rates is difficult to understand. Even the Tories have largely abandoned this model.

My interview in the main daily newspaper

I outlined our experience of market-based systems in healthcare and the benefits of collaboration over competition. The key points include:

·       The private sector brings extra costs through private finance, profits and dividends.

·       To work, they need to create surplus capacity, which in a universal healthcare system has to be financed by the taxpayer.

·       Markets also have administrative and other costs. Prioritising marketing managers over nurses seems a poor choice at a time of scarce resources.

·       Collaboration enables the sharing of best practice. If one hospital innovates that is shared in a collaborative system, rather than patented in a private sector one.

·       National and local planning is difficult when hospitals and other care systems are competing. Not to mention the considerable procurement savings in an integrated system, most notably on drugs.

From a workplace perspective, partnership working has brought stable industrial relations and better staff engagement in service design. The private sector approach brought expensive management consultants, with their 'Blue Peter' method, 'here is one I prepared earlier'!

That is not to say that despite high user satisfaction there are no problems with NHS Scotland. Performance under budgetary, workforce and demand pressures are rightly highlighted in Parliament and elsewhere. We are not achieving a meaningful shift in resources from acute to primary care, and community engagement is limited, not least because of limited local democratic accountability. However, none of these issues would be addressed in a market-based system.

I also spent some time explaining the problems we face integrating health and social care. Ironically, many of these exist because we retain the use of market mechanisms in social care. Most Scandinavian countries have fewer problems with this because these services are integrated with primary care in local government. 

So, while the Scottish healthcare system is far from perfect, it does at least avoid the disaster that marketisation brings. It is up to the Swedes to make their own decisions, but at least they can learn from those who have been there and won’t be returning anytime soon.

Financial and workforce challenges for social care in Scotland

Two new reports again highlight the problems facing social care in Scotland but offer few indications that a credible solution is on the horizon. 

The Accounts Commission annual overview of local government is rarely a cheery read. It again highlights how the Scottish Government has dumped austerity onto councils with 7.6% real-terms cut since 2013/14. This compares with a 0.4% cut to other budget areas. An increasing proportion of this reducing budget is also committed to central government priorities – a long way from the promise to end ring-fencing!

This year’s report pays particular attention to health and care integration. The Chair’s foreword summarises his concerns:

“Of particular note for us this year, Integration Joint Boards (IJBs) continue to

 face very significant challenges and they need to do much more to address

 their financial sustainability. The pace of progress with integration has been too slow and we have yet to see evidence of a significant shift in spending and services from hospitals to community and social care. I continue to be concerned about the significant turnover in senior staff in IJBs. This instability inevitably impacts on leadership capacity and the pace of progress.”

Unsurprisingly, a majority of IJBs struggled to break even. Without additional funding from partners, 19 IJBs would have recorded a total deficit of £58 million. 14 IJBs had not agreed on a budget by the start of the financial year, and half had unidentified savings. The projected funding gap for next year is £208m. This is reflected beyond next year in the medium-term financial strategy which shows increased demand for social care costed at £683m by 2023/4.

Many IJBs have highlighted workforce issues as a high-risk area, and not just at a senior level. The Scottish Government and COSLA have finally published an integrated health and social care workforce plan. This is long overdue, but in fairness at least there is one, along with a recognition that workforce planning is not an exact science.

The headline estimate is that Scotland will need 20,000 WTE more health and care employees in the period up to 2023/24, which they hope will be reduced by up to 10,000 WTE through mitigating actions like efficiency savings (cuts), technology and redesign. 

The significant number is over 14,400 home care staff, a group that is likely to be heavily impacted by Brexit and the UK government's immigration policies. This is a sector that already has high turnover rates. The overall vacancy rate in social care is almost twice the Scottish average.

Analysis and scenario planning is fine, but the real test of workforce planning lies in action. The principal plans appear to be: 

• Growing the numbers of staff in training. This is particularly important for the NHS, where most staff groups require formal qualifications. This includes a focus on community-based and mental health staff, which is essential if there is to be a meaningful shift in care from hospitals to the community.
• For other groups, the focus is on retaining the existing workforce, encouraging returners and widening access to the sector. Creating better career pathways and implementing the Fair Work Framework are essential initiatives.
• Pay is recognised as a critical issue. To say that ‘there have been some challenges in implementation’ of the Real Living Wage is something of an understatement! Sadly, there is little sign of any plan to address this.

Overall, the plan is again stronger on process than action. The NHS element has well-established workforce planning and some detailed plans to address shortages. There is at least a welcome aim to elevate workforce planning into a whole system position.

The weakness is in the social care sector. The fragmented, and at times chaotic, social care system in Scotland is in major need of reform. I fear that without that reform, we will again be looking at evaluation reports which highlight workforce gaps and financial problems for years to come.

Focusing on energy and the climate emergency

I see in The Herald that ScottishPower chief executive Keith Anderson said Labour promises to take back control of Britain’s energy network meant “losing focus” on the issue of tackling the climate emergency. I appreciate that the policy may impact on ScottishPower’s profits, which won't go down well with the company's Spanish owners. Still, Labour is very much focused on the climate emergency and reforming the failed energy market system is essential to that task. 

By common consensus across the environment lobby, Labour's Green Industrial Revolution is a shift change in political action on climate change. The key to this is the £250 billion Green Transformation Fund dedicated to renewable and low carbon energy, transport, biodiversity and environmental restoration. This investment will enable the Scottish Parliament to adopt more radical climate change targets and action plans, including retrofitting almost all of Scotland’s 2.6m homes to the highest energy standards.

You might have thought that Keith Anderson would have welcomed the new wind farm capacity (7000 offshore and 2000 onshore wind turbines), 60% of which will be in Scotland creating around 20,000 new jobs. It might be a little easier persuading the often cash strapped Iberdrola board in Spain to invest if there is government investment as well. Particularly when the government can borrow so much more cheaply than energy companies.

Of course, Labour will link this to a new industrial strategy, which, unlike almost all ScottishPower wind farms, will link investment to jobs in the UK. The shift to renewable energy is welcome, but there has been no Just Transition for workers in the industry and the supply chain. That is a failure of the UK and Scottish governments, and all power companies, including ScottishPower.

ScottishPower’s primary concern is Labour’s plan to bring UK energy systems into democratic public ownership, including those run by ScottishPower. This means the current profits will be reinvested or used to reduce bills, rather than being sent to Iberdrola in Spain. 

Citizens Advice estimated that over eight years network companies would make £7.5 billion in unjustified profits. The Committee on Climate Change also identified higher network costs as a key reason UK business have faced higher electricity bills than European competitors.

Public ownership will secure democratic control over nationally strategic infrastructure and provide collective stewardship for vital natural resources. This will help deliver Labour’s ambitious emissions targets. Private network companies and the toothless regulator Ofgem have failed to upgrade the grid at the speed and scale needed. In contrast, publicly owned networks will accelerate and coordinate investment to connect renewable and low carbon energy as they have done so successfully in other European countries, most notably Denmark. Only two countries in Europe have fully privatised electricity – UK and Portugal (Portugal because of EU austerity imposition). That’s because they understand the importance of democratic control of grid access.

Public ownership will also end the expensive regulatory system which involves armies of economic regulators in Ofgem and the power companies. As someone who represented energy workers for years, I have seen the waste that this system creates, all ultimately paid for by consumers.

Interestingly, Keith Anderson didn’t appear to be as exercised over the nationalisation of ScottishPower’s supply arm. The current supply companies are not profitable and have increasingly sought to reduce costs by offshoring jobs and cutting corners with customer service - as evidenced by consumer surveys. SSE has already sold off its supply business and Npower is effectively closing its business. I have long argued that the Scottish government should offer to take over ScottishPower’s supply arm rather than set up its own company. I suspect that might get the favourable attention of decision-makers in Bilbao.   

The so-called energy market has led to higher costs, consumer confusion over tariffs, and discrimination against low income pre-paid meter customers. Labour will create a green army of workers focused on energy efficiency, not selling energy in a flawed and false market. Just compare the confusion of the smart meter rollout with the way North Sea gas conversion was achieved in the 1970s. 

I’ll end by quoting Brian Wilson, the best energy minister I have ever worked with. He recently said: 

“In meeting the climate emergency, it is the state that must step in. It is government which needs the power to determine a response, rather than be in the supplicant position of asking a whole range of players if they would mind adjusting their priorities, please.”

Labour’s plans may not be well received in some corporate boardrooms, but they are very much focused on tackling the climate emergency for the many, not the few.

Manifesto reflections

I have worked on a fair few manifestos in my time. For Labour, UNISON and a range of campaigns. I can honestly say that the Scottish Labour manifesto for this General Election is, without doubt, the best. 

Manifestos are almost always a team effort and have some form of lay democratic governance to approve them – unless you are the Brexit company of Nigel Farage! The value of this approach is that a range of people, with different knowledge and lived experiences bring more to the table. Yes, it takes longer and is a challenge to bring together, but the final result is always better. Even for political manifestos, which often have to be pulled together in just a few days.

Most manifestos will be high-level documents, and it can be a challenge not to get bogged down in detail, blunting the key messages. This is easier for short campaign manifestos focused on a particular issue. Political parties (unless you are Farage and Co) have to cover the full range of topics and that inevitably involve some compromises on detail.

Sadly, few voters actually read all or even large sections of an election manifesto. Although I am always pleasantly surprised by the number of questions we are asked and the download numbers. Even in the electronic age, significant numbers of people still come to campaign offices and ask for one.

Of course, many more will see the highlights in the media and through membership organisations they belong to.  Sadly, this doesn't mean even basic facts are understood. For example, the guy on Question Time who vehemently asserted that as someone who earned over £80,000 he wasn't only not in the top 5%, but he was actually in the bottom 50%. Shockingly, Fiona Bruce didn't immediately realise this was nonsense, or that no one whispered into her earpiece.

Like many on social media, my immediate reaction was to wonder what employer paid such an idiot those wages. However, on reflection, it brings home how much work we still need to do to explain the facts about our economy and make a case for progressive taxation. And, as in other European countries, the benefits of a more equal society and the social wage. We should make The Spirit Level compulsory reading! 

So, why is the Scottish Labour manifesto the best I have worked on? Primarily because it not only recognises the key challenges facing Scotland and the UK – it provides the investment to act. 

It starts with the biggest global challenge, the climate emergency. The manifesto doesn’t just give us another round of targets and ambition, it invests in the solutions. From building and retrofitting warm homes, to jobs and a Just Transition to new industries, a new energy system and public transport including 4,200 new green buses. From the environment to our food production this a comprehensive response to the crisis.

The second and linked challenge is inequality. Here the manifesto sets out a range of actions that will go a long way towards eliminating poverty. Building 120,000 council and social houses, regulating private landlords, scrapping Universal Credit, free broadband, free school meals, social care reform, a £10 minimum wage and the biggest expansion of employment rights in history. These and many more are the measures we need to move from good intentions to practical action. 

For those who have said to me, ‘it’s pie in the sky’, it can’t be afforded. I say you haven’t met the Shadow Treasury Team! The Grey Book sets out the costings in more detail than any opposition party has ever done, and in my view, they have taken a pretty conservative approach to many key assumptions. I have worked on government projects that have been less well costed. 

I could go on, and probably will before this election is over, but I would urge everyone to read this manifesto. I have been around long enough to remember the hype, compromises and timidity we have seen in the past from all political parties. This manifesto really is transformative – it is real change!

  

Transforming social care in Scotland

If there is one issue that ought to be at the top of any policy agenda in Scotland, it is social care. One in 24 people in Scotland receive funded care support, and they deserve better.

Over half a million hospital bed days are lost every year because of delayed discharges. That is nearly 1500, mostly older adults, staying in hospital when they should be cared for in a community setting or their own home. And it costs NHS Scotland around £130m a year, resources that should be used to treat people who need hospital care.

Why? Because we have an underfunded, fragmented service delivered by an overworked, underpaid and undervalued workforce. Care workers are voting with their feet - leaving for employment that pays them a decent wage. Without stressing about inadequate time to look after those in their care.  

After serving on task groups, commissions and given evidence to many parliamentary committees, I know there is a fair degree of consensus about how to tackle it. While there may be some differences over how to reform the system, there is a clear consensus that the biggest issue is funding.

On December 12, we have an opportunity to make a huge difference. UK Labour is committed to introducing free personal care to England. That alone will bring around £600m of extra funding to Scotland. That is a staggering 25% increase if allocated to adult social care. The word 'transformational' can be overused, but that is precisely what this is. 

With that level of additional resource, we could invest in the extra capacity, radically improve the training, pay and conditions of the workforce, end charges and invest in preventative measures to support care in the community. 

 We should also use this investment to reform the system. 

We can start by scrapping the marketisation of social care. Too many providers, with the expensive management and back-office structures required to administer a fake market that delivers only for the few. A Scottish Care Service (SCS) could set national standards, with local delivery through a properly integrated service. That still leaves room for innovative voluntary sector providers who are prepared to meet those national standards.   

The SCS would work with a statutory workforce forum to deliver effective workforce planning, raise employment standards and training - making social care an attractive career for a growing workforce.  

This transformational investment will enable a new start for social care in Scotland. It's a one-off opportunity that we can grasp to invest and reform a vital service. We just have to vote for it. 

Tackling climate change with warm homes for all

If we don’t take action now, a zero-carbon energy system will remain a pipe dream for decades to come.

I was listening in on a focus group discussion the other day, run by a friend in the industry. When they got around to climate change the young people in the group gave this as their primary concern and were very clear that as a country, we were not doing enough.

This response didn't surprise me, but what did make me sit up was the response of the older people in the group. They said we had a duty to bequeath a clean planet to the next generation. My friend noticed this trend across several sessions and showed me data that older people had significantly changed their position on climate change action. 

While concern about climate change had risen across all age ranges, the increase was lower amongst middle-aged men. They cited concerns about the impact on jobs and some of the other lifestyle changes they would need to make.

That is why today's policy announcement on Labour's 'Warm Homes for All' is so important. It takes practical action on climate change, cutting carbon emissions by 10% by the year 2030. It also reduces energy bills, particularly for low-income households, by an average of £417 a year. In Scotland, it will create at least 18,500 direct and 16,600 indirect jobs – directly addressing the concerns of the focus group.

The buildings sector makes up nearly a quarter of Scotland’s emissions, and residential buildings made up the bulk of this at 73%. Fuel Poverty affects 613,000 homes in Scotland, and thousands die every winter due to the effects of living in a cold, damp home.

The Scottish Government has switched resources for fuel poverty off and then on again with a range of programmes. They will no doubt say that this is due to Tory austerity. What is now clear is that the election of a UK Labour Government will create the opportunity to put a transformative scale of investment into seriously tackling this issue.

I have campaigned on fuel poverty for many years, sat on working parties, written reports, and supported many worthwhile initiatives. I have heard UNISON members in social work, and health care describe their frustration at helping people, only to send them home to buildings that exacerbate their conditions. This new plan is on a scale that could eradicate fuel poverty in Scotland.

It is also only one part of a broader plan that Labour calls a 'Green Industrial Revolution'. I am not a great fan of political soundbites, but I have been impressed by the detailed work being put in by the Labour team working on this issue. The recently published 'Thirty by 2030' report shows how we can put the UK onto the path of zero-carbon energy and boost the economy at the same time. They describe a plan that could boost the UK economy by £800bn, creating 850,000 new jobs, increasing household incomes and avoiding 6,000 deaths per year through improved air quality. Not to mention the wider health benefits.

Tackling climate change isn’t easy, but all too often, the opportunities are ignored. The UK could be the world's climate leader while improving the lives of the many. What’s been missing is the political will. Today’s announcements show that the political will is now there – we just have to vote for it!