Outrage over health sector PFI legal fees

Health minister Alan Milburn has launched an attack on the “exorbitant” fees of lawyers and financial advisers to NHS trusts on Private Finance Initiative projects.

In a speech last week, he revealed that NHS trusts had so far paid £30m in fees to legal and financial advisers on PFI schemes, yet not a single major contract had been secured.

He highlighted two NHS trusts – Guys and St Thomas's and Royal Berkshire and Battle – which had paid advisers a total of £1.3m for work on projects which will not now be proceeding.

The £92m Guys and St Thomas's scheme was scuppered in December last year when the trust decided it would not be able to keep up annual payments to the contractors Tarmac and United Medical Enterprises. It is understood to have spent £577,000 on legal and other consultancy fees in preparation.

The Royal Berkshire and Battle Trust, whose advisers included Reading firm Clarks, spent £500,000 in consultancy fees on a £25m PFI project for new offices and car parking. However, last month it decided that the scheme put together by Reading consortium Proteam 2 did not provide value for money or enough car-parking spaces.

Milburn pointed out that the £30m fees the trusts have spent was equivalent to the cost of 45 large general practitioners' surgeries, or 15 health centres or 7,500 hip-replacements or 2,000 kidney transplants.

He blamed the Conservative government for mishandling PFI in the NHS. “We are considering ways of providing advice from the Department of Health to enable trusts to handle PFI deals without employing expensive external advisers to cover ground already trodden in other parts of the NHS. There should be no more re-inventing of the wheel.”

He continued: “The Government is committed to making PFI work so that new hospitals get built. By cutting PFI red tape, we will get NHS cash spent on patient services, not on exorbitant advisers' fees.”

A Department of Health internal review of NHS PFI projects will end later this month. A departmental spokesman said one answer may be to strengthen the NHS executive's PFI unit. “We want to pool the information already gleaned from PFI projects to provide standard advice for other schemes,” he said.

Last week, Scottish firm MacRoberts called for standard documentation for PFI projects and other lawyers have criticised the previous government for rushing the introduction of health sector PFI projects and not choosing a few good schemes to act as pilots.

Those law firms acting for bidders for hospital PFI work are uneasy about the large amounts of time and money spent by their clients tendering for a contract, which is ultimately awarded to competitors.