Analysis

Private finance initiatives during NHS austerity

BMJ 2011; 342 doi: http://dx.doi.org/10.1136/bmj.d324 (Published 09 February 2011) Cite this as: BMJ 2011;342:d324
  1. Allyson M Pollock, professor1,
  2. David Price, senior research fellow2,
  3. Moritz Liebe, international public health policy research student 1
  1. 1Centre for International Public Health Policy, University of Edinburgh, Edinburgh EH8 9AG
  2. 2Centre for Health Sciences, Barts and the London, Queen Mary’s College, University of London
  1. Correspondence to: A M Pollock allyson.pollock{at}ed.ac.uk
  • Accepted 15 November 2010

Allyson Pollock, David Price, and Moritz Liebe believe that ring fencing of private finance initiative payments prioritises investor returns over patient care and call for tighter

monitoring and renegotiation

The NHS is facing serious revenue pressures if it is to meet the target of £15bn-20bn efficiency savings by 2013-4.1 One important pressure for trust budgets in England is the annual private finance initiative (PFI) charge, which is ring fenced and indexed to inflation. Since 1991, all NHS trusts have had to pay a charge on NHS buildings and equipment to the Treasury, which averages around 6% of income. However, NHS hospital trusts with PFI contracts may spend up to 18.6% of their annual income servicing the cost of privately financed investment; this money goes to the private sector.2 PFI contractors are insulated from efficiency targets. This, coupled with serious deficiencies in contract monitoring, compliance, and contract enforcement at departmental level, means that there are real concerns over the value for money of the policy. Lack of control over PFI costs has serious implications for quality and levels of NHS care.

Rise of PFI

Since 1992, most large scale public capital investment in the UK uses the PFI procurement route under which a consortium of investment banks, builders, and service contractors raises the finance and designs, builds, and operates the facilities for the public authority through a project company.3 4 Soft facilities management services such as laundry, maintenance services, catering, and cleaning are also often contracted out to project companies.

By December 2009, 159 PFI hospital contracts with a capital value of £13.16bn (€16bn; $22bn) had been signed in the UK, with NHS England being the biggest procurer in terms of numbers (72%) and capital value of the assets (86%).5 Of the 135 new NHS hospitals constructed between …

Sign in

Free trial

Register for a free trial to thebmj.com to receive unlimited access to all content on thebmj.com for 14 days.
Sign up for a free trial

Subscribe