Michael White: some hospitals are too big too fail

It was a stinker, but Peterborough’s Tory MP, Stewart Jackson, whom PAC chair Margaret Hodge let handle the launch because of his local interest, picked the wrong day to do so, through bad luck or oversight. It happens.

‘None came out well from the grilling. “Hapless” is one label that springs to mind for officials’

Since the PAC’s MPs’ follow-up investigations by the formidable National Audit Office, we’ve heard some of it before when the NAO published highly critical reports on the two trusts in November.

One covered the £1m a week losses being sustained at Peterborough’s grandiose, new 650-bed private finance initiative-funded city hospital trust, the other the equally optimistic financial promises made when Circle bid to become the first private firm to manage an entire NHS hospital, ailing Hinchingbrooke in Oliver Cromwell’s birthplace.

What the PAC did was join the dots between the two NAO studies and to interrogate the prime culprits. No, not Sir David Nicholson, currently topping the Daily Mail’s 10 Most Wanted List (remember that Osama bin Laden is dead), but senior officials such as the Department of Health’s Una O’Brien and David Flory, fast-talking Ali Parsa and Sir Neil McKay, chief exec of the East of England Strategic Health Authority.

No strategic overview

None of them came out well from the grilling. “Hapless” is one label that springs to mind for officials. Surely, said MPs from all sides, this is an NHS area which has been over-provided for some time? Indeed. Peterborough is a rapidly expanded 1960s new town (population 185,000) where one in ten residents are now eastern European arrivals.

But equally ancient Huntingdon (population 20,000) is small fry, 25 miles equidistant between it and Cambridge (population 120,000) with its prestigious hospital cluster.

‘Circle could still walk away, leaving the NHS to pick up Hinchingbrooke’s pieces’

Was no strategic overview taken in Whitehall or locally? Seemingly not. Monitor flagged up disquiet about the £330m cost of Peterborough’s upgrade which involved rebuilding two old hospitals on one site, the city’s largest construction project since the cathedral was finished in 1375.

One PAC MP recalls that the grandees were asked “who was responsible. There was a deathly hush. This is the new NHS. None of them took responsibility for these crass decisions”. I should add that they did say lessons have been learned. They always do.

The ‘East Anglian mafia’

Yet we shouldn’t let elected politicians off either. The area has long boasted “East Anglian mafia” VIP Tories − John Major, Brian Mawhinney, Andrew Lansley. Nursing Peterborough’s then-Labour marginal seat, Stewart Jackson admits to being part of the local health community’s collective PFI “madness,” which has helped cripple a once-outstanding trust, in 2004 one of the first 10 FTs in England.

Stephen Dorrell, an early champion of PFI − it was then called “unconventional finance” − was health secretary when the “madness” started. Then PFI was meant to allow would-be investors to make a more realistic judgement of the local health economy than politicians because they would bear the financial risk. As Gordon Brown developed it, New Labour PFI took the costs off the Treasury’s books but did not transfer risk from the state.

Ironically, the Circle contract (won against a Serco bid) was an attempt to do better.

David Flory reminded MPs that two significant risks have been transferred, the cost of future losses and demand for services. But Circle could still walk away, leaving the NHS to pick up Hinchingbrooke’s pieces? Or close it down? Yes. But Peterborough remains too big to fail.

Michael White writes about politics for The Guardian