‘PFI was a disaster — Labour mustn’t repeat it’

PFI – the Private Finance Initiative – is a private finance model which was hugely popular under the Blair government. It was popular because it allowed politicians to deliver new public infrastructure – like hospitals – while keeping the debts off the public balance books. 

However, we now know that PFI was a complete disaster. 

In 2017, the Office for Budget Responsibility described using ‘off-balance sheet’ financing for public infrastructure in order to dodge borrowing rules as a ‘fiscal illusion’. In 2018, the Conservatives highlighted the potential risk of PFI to government finances, and said ‘goodbye to PFI’. 

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Most significantly, PFI has cost us dearly. Research has found that taxpayers are paying  £80 billion for just £13 billion of actual investment. PFI has resulted in hospitals repaying what they originally borrowed many times over. One trust – the Essex Partnership University NHS Foundation Trust – has paid back 27 times what was borrowed under PFI. 

Private Finance harms patients

As a result of NHS PFI deals, scarce resources are being diverted away from patient care, and towards private profit. 

In the last five years alone, NHS trusts have spent more than £1.8 billion on PFI interest payments. This would have paid for the starting salaries of 50,044 new doctors. Some hospitals are spending more on repaying PFI debts than they are on medicines for their patients. 

In January 2013, major A&E, maternity, paediatric and acute adult services at Lewisham Hospital were nearly closed down in order to make up for astronomical PFI debts in the South London Healthcare Trusts. These lifesaving services only stayed open because campaigners challenged the decision and won. 

New PFI plans 

Despite the harm caused by PFI, this government is currently considering introducing new private finance into our NHS. The 10 Year Plan for Health outlines an intention to consider the use of Public Private Partnerships (PPPs) to build new Neighbourhood Health Centres, with a decision to be made at the Autumn budget. 

The 10 Year Plan refers to learning from the mistakes of PFI. However, this promise has been made many times before. PFI has already been repackaged as PF2, LIFT, the Scottish Non-Profit Distributing (NPD) model and the Welsh Mutual Investment Model (MIM). You can read more about each of these models – and their impact on taxpayers and patients – in We Own It’s NHS Private Finance briefing here. 

The key takeaway to be gleaned from close analysis of each of these models is that they are fundamentally the same. In each of its iterations, private finance demands that the taxpayer pay back an amount which far outstrips the cost of the asset itself. 

Cardiff’s Velindre Cancer Centre, for example, was built under the Welsh MIM model, and will result in the Welsh government paying back almost three times what was borrowed. Member of the Senedd Carolyn Thomas has already described MIM as ‘more expensive in the long run – with higher repayments that ultimately cost taxpayers more for the same infrastructure’. 

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Time and again, private finance has failed both patients and taxpayers. It is clear that the only lesson worth learning from the disaster of PFI is that private finance has no place in our healthcare system. 

Mounting Pressure 

As the Budget draws closer, MPs, campaigners, patients and experts have been putting pressure on Rachel Reeves to drop her private finance plans. 

53 accounting and finance academics have signed an open letter to the Chancellor, asking her to abandon this ‘dangerous and damaging proposal’. The letter highlights that ‘using private capital in the NHS is no different from a family buying their home using a payday loan’, and makes it clear that new private finance is not a fiscally responsible solution. 

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On Tuesday 18th November, MPs, patients and members of the public organised by We Own It will be handing in a petition signed by over 17,000 people, demanding that we do not use private finance to fund Neighbourhood Health Centres. Labour Party MPs Simon Opher, Richard Burgon and Steve Witherden will be attending to speak about the dangers of NHS private finance. 

Just over a year ago, in their 2024 Manifesto, Labour promised that ‘the NHS will always be publicly owned and publicly funded’. They must now keep that promise. 

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