Andrew Lansley's NHS hospital crackdown is a product of PFI - The Guardian

In putting special measure on the three hospitals of South London Healthcare Trust, health secretary Andrew Lansley is making good on promises last November that he would get tough with parts of the NHS managers could not or would not– deal with.

The signs have been there for all to see. South London lost its chief executive two weeks ago and Lansley's "unsustainable providers' regime" means that the trust's board will be suspended and an administrator sent in to work out what to do.

The three hospitals – Queen Mary's in Sidcup, Queen Elizabeth in Woolwich and the Princess Royal University Hospital in Bromley – lost £65m last year on a turnover of £440m. When red ink is spilt in the NHS, many worry that patient safety will be comprised. However the trust has been sensitive to these charges – closing A&E and emergency services at Queen Mary's in December 2010 because it argued safety would be comprised if they attempted to stretch finances too thinly.

But with losses forecast to top £60m this year, there is much more pain to come. Closing Queen Mary's completely would save just £12m a year. Lansley says such austerity might be needed because of Labour profligacy. Under the last government the trust signed two huge private finance deals – which cost the hospital more than £61m in interest charges this year.

The health secretary went on to suggest that the trust may cut corners to balance its books – and therefore affect patient care. He raisedthe issue of whether hospital mortality rates and waiting times would be affected. Lansley's reference point here is the Mid Staffordshire hospital debacle where at least 400 "excess" deaths occurred – partly because achieving financial targets came at the expense of appropriate and safe staffing levels.

This is Lansley's weakest argument, because despite years of losses the South London Healthcare Trust met the Department of Health's targets in May – getting 93% of patients seen within 18 weeks and 97% of people treated within four hours in A&E wards. It is also in the top 98% of trusts for expected levels of mortality after surgery.

On the issue of PFI, the National Audit Office last year said 22 trusts had schemes costing £763m a year. Seven trusts – including South London – were not viable under any scenario and the government bailed them out earlier this year with £1.5bn of taxpayer's cash.

So why did hospitals at Barking, which has had to find £50m on its private finance initiative (PFI) deal and is heading for a £50m loss, be allowed to go on despite years of red ink? And what about Peterborough, which received £46m of bailout cash despite losing its chief executive and chairman last year in a matter of days? The difference, says the Department of Health, is that Lansley has agreed with management over frontline changes and cuts. South London did not.

In the longer term there has to be a question over the 100-plus NHS PFI schemes, where private firms pay to build new hospitals but the taxpayer is forced to pay an annual fee or "mortgage". John Appleby of the King's Fund said that the issue of how private firms can "get away with lending to borrowers in the NHS who would not be able to pay has to be dealt with".

For many, PFI was always a bill that would bankrupt the NHS. Allyson Pollock, a fierce academic critic of the scheme, first raised concerns in a seminal paper in 2007. She argued that within a decade NHS payments to PFIs would rise from £470m to £2.3bn. She warned then that hospitals had plans to "sell assets and cut service capacity to offset the shortfall". It's the same argument that Lansley is now using to declare hospitals bust.