The FT has reported this morning that:
The government has sounded out private finance investors about backing up to 200 neighbourhood health centres, in a move that could transform NHS care in England but threatens to reignite a fierce debate over the funding model.
Investors would win long-term contracts to design, build and manage local NHS centres with the aim of having one in every community by 2035 and the most deprived areas targeted first, under plans set out in documents from the Department of Health and Social Care and seen by the Financial Times.
The new PFI clinics would combine healthcare, voluntary and local authority services in a “one-stop shop” aimed at moving care out of hospitals, with construction costs ranging from £10mn to £40mn per facility using a “standardised design”.
This is, of course, a straightforward revival of the totally failed and discredited Private Finance Initiative (PFI), first used by the Tories in the 1990s, but then massively expanded by Labour, with outcomes that are still harming pubic services today.
PFI was once hailed as a miracle cure for Britain's crumbling schools, hospitals and transport. It was claimed that new infrastructure would be built without the government “borrowing a penny”. That was never true. Instead, what we got was a thirty-year lesson in how ideology, accountancy tricks and private profit can undermine the public good.
First, the whole project was built on a false premise. Governments that issue their own currency, like the UK, can always finance their own investment. There was never any need to rely on private capital to build a hospital or a school. The claim that “there is no money”, implicit in all PFI projects, was political theatre, not economic reality.
Second, PFI was vastly more expensive than public borrowing. Contractors and financiers charged interest rates and demanded returns far higher than those the government itself would ever have faced. Over the life of many contracts, the government has ended up repaying two or three times the original construction cost. The profits were privatised, the risks were socialised.
Third, the so-called “value for money” tests that justified PFI were rigged. Treasury guidance required an analysis of whether private finance really offered savings over public borrowing. The answer was always yes—because the models assumed enormous “risk transfer” to the private sector. In reality, the government could never let a hospital close if a contractor failed. The risks never went away; they simply stayed with us.
Fourth, the contracts themselves were inflexible and punitive. Most ran for 25–30 years. They locked public bodies into rigid repayment schedules and imposed penalties for even minor changes. A hospital that needed to reconfigure a ward could find itself paying hundreds of pounds just to move a plug socket. The deals served financiers, not patients or teachers.
Fifth, PFI was all about hiding debt. By shifting liabilities off the government balance sheet, ministers could claim they were investing without borrowing. This was pure fiscal sleight of hand. The liabilities were still real. They just appeared in a different column, one that was less visible to the public.
Sixth, the outcomes were poor. Because PFI bundled together construction, maintenance and services, contractors cut corners to maximise their margins. Cleaning, catering and upkeep often suffered. Many NHS trusts found themselves short of money for staff because their PFI repayments consumed so much of their annual budgets.
Finally, the model collapsed under its own weight. By the 2010s, the National Audit Office, parliamentary committees and even some former ministers admitted that PFI had not delivered value for money. In 2018, the Tory government stopped new PFI deals. But the old ones still haunt budgets to this day.
So, let's be clear: PFI was never really about efficiency or innovation. It was about ideology. It allowed politicians to shrink the visible size of the state, hide public debt, and hand guaranteed profits to the private sector. The public will still be paying the bill for decades to come.
If we are serious about rebuilding this country, the lesson is obvious. The state must invest directly in its own future. Anything else is smoke, mirrors and private gain at public expense. And yet, Wes Streeting appears to be intent on reviving this failed model. Why is that?
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Because Wes Streeting has been bought and paid for. Just like the rest of the cabinet.
Yesterday in the press, it was “the new Blairites in government” will promote growth!!
Now we know it’s the bad old Blair days back. Presumably the UD hedge funds will be favoured and make super profits.
UD or US Hedge Funds???
Right, another letter to my MP.
🙂
Am I right in thinking this will apply in Scotland?
I fear so. I hope not, but I fear so. It will be this, or no money,
Aah, yes.
The strong fists of the union.
The cost to the Scottish taxpayers of P.F.I, (Private Finance Initiative) schemes is estimated to be costing a cumulative £40 billon, with further ongoing costs of £1.1 billion in 2025. The projects themselves are estimated to have a total worth of £9 billion. And there is also a further £13 billion still to be paid over the coming years.
Agreed
PFI=
Price
Fixing
Inception
This is becoming intolerable. We seem to have just learnt to live with bad ideas. So, delivery matters only. The bills can be paid later?
This is political madness.
The Scottish Parliament debated a Motion about Private Finance Initiative and Public-Private Partnership contracts, in February of this year, in response to media reports that Reeves was considering reviving this discredited funding model.
Some shocking examples from the debate:
North Ayrshire Council – will have paid £440.1million by 2038 for 4 schools constructed 2 decades ago for £83million.
Kilmarnock Prison, East Ayrshire in operation from 1999, built for £32million – total repayment cost over £367million.
A £45.5 million waste water project in Levenmouth, Fife cost £721.2 million in repayments, almost 16 times its original cost.
Edinburgh Royal Infirmary, completed in 2003, built at a cost of £184 million, but estimates suggest that payments could exceed £1.1 billion by the end of the contract. The Health Board has been in dispute over hospital maintenance issues in particular regarding heating, ventilation, water and window problems.
I’m sure there are plenty more horror stories of this kind from around the UK. Are we really expected to believe that Wes Streeting is not aware how awful these contracts were/are?
What’s the wee squirt’s cut?
Noted.
And thank you.
Isn’t the building of new hospitals the kind of infrastructure the Government should fund directly and own using the money from our central bank as it appears to satisfy the requirement that the resources and materials etc are available? It doesn’t need a variety of middle men taking their profit and adding to the cost.
Yes, in a word.
This is simply Mafia style extortion fuelled by the monetary mechanics ignorance of the public! The UK now has at least three fascagist parties – Reform, Labour and Conservatives. This ought to be in the Guinness Book of Records under a Stupidity category!
Streeting was on R4 this morning – didn’t hear all of it but don’t think he was asked about this latest destructive initiative. He has produced a league table which apparently shows two thirds of hospital trusts are ‘failing’, which must be part of his argument for this latest privatisation initiative.
GP’s are already ‘in the community’ – and if they had enough funding to employ all the doctors they are short of – it would go a long way to cutting down the demand for hospital care.
The PFI health ‘hubs’ are not only hideously costly to the public purse over decades to come but also largely performative – while social care still not fixed, and doing absolutely nothing about his much vaunted ‘preventative’ policy.
Nothing about ultra processed food, clean air in schools and hospitals etc etc
Despair.
Wpecifically, we’re treating was asked about Kings Lynn Hospital this morning, which is supposedly the worst in the country. I used to live 10 miles from Kings Lynn, and know how terrible the physical infrastructure of this hospital is, but I would not criticise the people who work there. It is massively overdue for replacement for the simple reason that it is literally physically falling down around the staff, which is an obvious threat to their health and safety.
But, what Streeting was asked was how did it benefit the people of Kings Lynn to know that their hospital was the worst in the country, and where else could they go, when the next available hospitals are over 40 miles away, and to many people in the area, completely inaccessible? He had no answer. The point is, what he has produced is a deliberately rigged table that provides no value to real people, but does offer a benefit to those who want to cherry pick the resources of the NHS for the purposes of privatisation.
I’ve put a link to this on weownit.org and Julia Patterson’s call to action substack. We need to stop it going ahead.
https://weownit.org.uk/act-now/no-new-pfi-in-neighbourhood-health-services?fbclid=IwY2xjawMsyuJleHRuA2FlbQIxMAABHtimeG5kONfmUPdfYaOBBigDMsgXgO0LLXGRoiKxxYvmHaFZkjhGUqvA2D0S_aem_7P_3mwRNrJWZq5ikO9cHYQ
Einstein’s definition of madness…. doing the same thing again and expecting a different result.
…. and if you think bond traders will approve of this method of finance then think again, we are not that stupid. We can “present value” the contracts the government will agree and realise it is economic nonsense. Indeed, the “moron premium” on gilts might rise.
Invest wisely…. that is all we want. Finance will take care of itself.
Much to agree with.
According to Kemi Badenoch, we will soon be needing an IMF bailout anyway, so we can just use the money they give us to pay all the PFI costs.
🙂
A former colleague was a Governor at a PFI school
Every Governors meeting cost £1000 for a room in the school ‘after hours’
Thats NOT value for money in my book
No doubt they had to hire their own room.
“Every Governors meeting cost £1000 for a room in the school ‘after hours’”
A private banquet room in a mid-level to high-end US restaurant cost much less than £1000.
🙂
Responsible Governors would not have accepted that. I’m guessing that at least one of the Governors would have access to a meeting room that was available for free. And worst case, some other local venue could be found at far lower cost.
It pisses me off when people so freely waste other people’s money!
I live in Sheffield, where Amey was awarded a 25-year contract to maintain roads. The council’s chief executive didn’t have time to read the contract before signing it. There was a 5-year battle before the public was allowed to see the contract. Enormous resistance when it appeared that half of Sheffield’s roadside treese were to be cut down and not replaced. Legal battles and passive resistance eventually worked, so that Amey/Sheffield Council now collaborate with the protestors, and the council has apologised fir its lies and for taking protestors to court. Just this experience is enough to turn one off any sort of PFI.
Agreed.
A total disaster for Sheffield.
Corporatism. Asset managers (largely US) with ever growing mountains of money lobbying governments to create de-risked rent generation opportunities for then. It’s behind the massive growth in build-to-let and will be used to deliver the governments various house building schemes. Civil Servants lack skin in the game, they are not responsible for the money being spent, and when you look closely an various government agencies the line between public and private sector can be a blur.
There is an opportunity here to standardise and ‘bulk buy’. The state is likely to do considerable de-risking e.g. site preparation (decontamination, drainage etc.) and when planning permission is granted on privately owned land the landowner will get the uplift. Dysfunction provides gravy train for consultants and professionals.
There were enough studies of what we should learn from PFI last time around, but history is the lesson we fail to learn from.
Design to whose specifications. And when the NHS has agreed the design is the build contract to be awarded on a lumpsum basis or will the contract sum be subject to ongoing variations . And then at what point will the client know the extent of the capital element of the service charge.
These were nightmare contracts to manage and fund for public bodies.
But that was their whole appeal for the private sector. We all know that builders make more money out of contract variations than they probably ever do out of the base contract. PFI was ripe to be looted on that basis, and will be again.
I have always wondered why hospitals all have to look different, they all basically do the same job and it would make sense to have a standard design and appearance. Tried and tested form and function, just shape changed to suit the location. No need for expensive design teams etc re inventing the wheel to win prizes. Perhaps we need Nightingale hospitals that will actually be used.
BayTampaBay, sorry fat fingers, should have typed US.
The US hedge funds are buying up UK construction companies to bid for the construction projects that Reeves proposes to require UK pension funds to invest in.
A UK company, Assura, specialising in providing buildings eg doctors surgeries/hospitals is currently fighting off a bid from a US company.
What could possibly go wrong?
The claim that “there is no money”, implicit in all PFI projects, was political theatre, not economic reality.
I think you are being too kind.
I would call it a lie.
It’s fairly clear that many PFI contracts are tantamount to theft on the same scale as Covid contracts and as corrupt as the underhand deals we have seen in local government in various parts of the country down the years. We have a National Audit Office, which is often denied the chance to look at these deals in case they actually tell the truth about what’s going on.
Surely, the gov can do much better- in fact, we know it can. The public are ill- informed about these contracts and the media are unlikely to report fairly on them unless they can blame them on the left.
I read this morning in the Guardian of Boris Johnson’s open venality, yet you will not read it anywhere else, nor will the BBC touch it despite overwhelming evidence supplied by the reporters.
Too many people are on the take and generally looking the other way in the UK.
There was a good reason why the NAO was taken off the audit to many local authorities: they would have reported the meltdown in these contracts a lot earlier. As it is, very oddly the private sector auditor is engaged to look at these arrangements to buy large failed to deliver anything at all.That’s very convenient. Please excuse my cynicism. Some of my colleagues at Sheffield have done great work around this issue.
“Risk transfer…” ???
Aah yes, I seem to remember that when Carrillion went bust, risk seemed to bounce right back into the public sector, as it always does.
Before Carrillion went bust, guess who tried to pass the buck back to the public sector as the company began to wobble and deceive?
https://www.liverpoolecho.co.uk/news/liverpool-news/carillion-repeatedly-tried-sue-liverpool-23337707
After Carrillion went bust, guess who picked up the tab?
https://news.sky.com/story/ministers-bail-out-335m-liverpool-hospital-after-carillion-collapse-11507854
Maybe this time insist the directors (and Secretary of State for Health + their Junior Ministers & PPS’s) make themselves personal guarantors (like with a business loan secured on a home).
How about that Wes? Put your home and personal assets where your mouth is?
Or even easier, cut out the profit gougers altogether and use public money to start with.
All correct.
Again, colleagues at Sheffield have done a lot of work on this.
This is happening up here at the moment, as well as my surgery having been put into special measures.
https://northeastbylines.co.uk/news/health/campaigners-urge-a-rethink-on-nhs-centre-closed-overnight/
Here in Nova Scotia we had PFI (we called it Public Private Partnership, a.k.a. P3) building schools in the 1980s and 1990s, initiated by a Liberal government. Nine schools cost CAN$35 Million more than government financing them. After 30 years they were turned over to the provincial government (for an additional pay-out) and needed extensive renovation as they’d been so poorly built and maintained. A Conservative government put a stop to that type of arrangement. Now, a new neoliberal Conservative government is building a CAN$4 Billion addition to our main hospital in Halifax. It boogles the mind to think what that will cost us over the next 35 years. This is not just ideology, it is corruption. It comes cheap in Nova Scotia, because businesses and unions cannot donate to politicians or political parties as they do in the UK (and individual donations are limited to $5,000 per year), although they can provide jobs once the political career is finished.
The whole world is a mess…..
This is deeply frustrating but I follow Dr Julia Patterson so I could see it coming.
If I’m permitted a plug I think subscribing to her Substack is well worth while.
I plug it, too
Though Iraq is usually the first thing held against Blair’s era, I have long thought that PFI and deregulation did massively more long term damage to the UK economy and society.
Reeves seems intent on extending that damage.