The private finance initiative: PFI in the NHS---is there an economic case?

BMJ 1999;319:116-119 ( 10 July )

Education and debate

The private finance initiative

PFI in the NHS $---$ is there an economic case?

Declan Gaffney, research fellow ^a, Allyson M Pollock, head ^a, David Price, research fellow ^b, Jean Shaoul, lecturer ^c.

^a Health Policy and Health Services Research Unit, School of Public Policy, University College London, London WC1H 9EZ, ^b Social Welfare Research Unit, University of Northumbria, Newcastle upon Tyne NE7 7XA, ^c Department of Accounting, University of Manchester, Manchester M13 9PL

Correspondence to: Allyson Pollock allyson.pollock@ucl.ac.uk

The first 150 words of the full text of this article appear below.

The private finance initiative substantially increases the cost of hospital building. Total costs (construction costs plusfinancing costs) in a sample of hospitals built under the privatefinance initiative are 18-60% higher than construction costs alone(table 1). Shareholders in private finance initiative schemescan expect real returns of 15-25% a year.¹ The consortiumsinvolved in these schemes charge the NHS fees equivalent to 11.2-18.5%of construction costs (table 2). If the Treasury were to financenew hospitals directly out of its own borrowing it would pay areal rate of annual interest of 3.0-3.5%. It has been estimatedthat the £2.7 billion Scottish private finance initiative programmewill cost, at a conservative estimate, "£2 billion more than ifthe Treasury had acquired the assets directly."² The highercosts will be met locally through cuts in clinical spending andnationally through subsidies from NHS capitalbudgets.

Medical staff . . . [Full text of this article]

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