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PFI is here to stay

BMJ 2002; 324 doi: https://doi.org/10.1136/bmj.324.7347.1178 (Published 18 May 2002) Cite this as: BMJ 2002;324:1178

With the publication this week of the Commons health committee's inquiry into the role of the private sector in the NHS, Seamus Ward looks at the failures and successes of the private finance initiative

The private finance initiative (PFI) is here to stay. That much was confirmed with April's Budget, when ministers announced that the initiative would be extended into primary care and that by 2008 there will be 42 new major hospitals, most of which will be built using private funding.

Given its pre-eminence now, it may seem surprising that PFI had a slow beginning. It was launched by the then chancellor of the exchequer, Norman Lamont, in his 1992 Budget as a way of modernising the public sector infrastructure without the government having to borrow the capital up front.

But it would be five years before the first sod was cut on the site of the first large acute hospital, one in the Dartford and Gravesham NHS Trust. It was a further three years before the new hospital opened.

While there was no shortage of interest from the private sector, negotiations on the early PFIs were slow. Financiers in particular were worried that a trust with a PFI could be wound up before the end of the initial contract period (usually 30 years), leaving its private sector partners with a hospital that potentially no one wanted. Legislation introduced by the Conservatives in 1996 removed this problem by transferring all a trust's liabilities to the secretary of state for health should it be wound up.

Despite the difficulties in putting together contracts, the PFI quickly became viewed as the only game in town for an NHS starved of capital funding. This is still the case, although the current government and the devolved administrations would point out that private finance is used only where it is shown to be better value for money than a publicly funded scheme.

The government has pledged public funds for hospitals in Sheffield, Porthmadog, and Reading, but it insists that PFI should be considered in all capital spending.

Fourteen major units (those with a value of more than £25m ($37m; Embedded Image40m)) have been opened, including eight in England. Together they have a capital value of almost £1.2bn.

Projects in Northern Ireland and Wales have been smaller, though the proposed Belfast City Hospital cancer unit will cost around £40m, while the new Baglan local general hospital, serving Neath and Port Talbot and due to open later this year, has a capital value of £66m.

Despite the huge investment and the fact that the initiative is building many much needed modern facilities, PFI has not gone smoothly and there have been embarrassments for the government.

The reduction in beds was a huge publicity disaster for the PFI. The public service union Unison estimated that 3800 beds were being lost in the first 11 hospitals financed by PFI. Though it could be legitimately pointed out that bed reductions had been going on before PFI, the damage was done, and PFI projects were told to add beds after the publication of the national beds inquiry in February 2000.

A National Audit Office report into the £94m Dartford and Gravesham scheme found the trust had overestimated the project's potential savings by £12m.

There was further embarrassment when the government's own design guru, Stuart Lipton, said PFI hospitals were repeating many of the mistakes of the 1960s tower blocks. Some faced leaking sewage, unusable rooms, and no air conditioning, he claimed.

Cumberland Infirmary became infamous for its glass atrium that was too hot in the summer, while in other privately financed hospitals there have been complaints of corridors that are too narrow to turn a trolley and of nurses' stations placed where some patients can't be seen. A safety scare has delayed the opening of the new Bishop Auckland hospital after two workmen were electrocuted.

There was an interruption to the power source in the theatres shortly after the opening of new units at South Buckinghamshire NHS Trust, and both sites were handed over about 10 weeks late.

South Bucks Community Health Council takes a pragmatic view of the PFI. “There were mixed feelings about private finance, but the fact is if the trust hadn't gone down the private finance route we would never have got these new buildings,” it says.

The initiative has had its successes. The South Buckinghamshire scheme has won a design award, and the new £100m Swindon and Marlborough hospital has received plaudits from environmentalists.

David Cook, chief executive of the Natural Step, a UK based charity that aims to promote environmentally friendly construction, worked closely with the project. “They have saved £1m over the life of the project in procurement alone and have done some amazing things in terms of the way they manage waste,” he said.

Bill Davidson, a former health official, told the Scottish parliament's inquiry into PFI last November that in the 1980s a new publicly funded hospital was nearly completed without a mortuary. He insisted that this would not happen under PFI.

After the Budget, health secretary Alan Milburn promised new forms of PFI. Increasingly, private finance projects will involve a number of different elements—a new, multimillion pound district general hospital will be “bundled” in with, say, the refurbishment of GP surgeries and perhaps a new mental health facility. The £211m redevelopment project in St Helens and Knowsley, which will rebuild three hospitals and create four primary care centres, is one example.

The debate over PFI will continue to rage, but there is little doubt that the initiative will develop further.

Major completed PFI schemes

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(Credit: PA)

Tony Blair meets workers at the United Kingdom's biggest PFI project, the Edinburgh Royal Infirmary

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