Why we need action on PFI in the NHS: arguments for an incoming government

Executive Summary

Devising a plan to adequately fund the NHS will be one of the greatest challenges for the next government. Discussions around a projected funding gap of £30bn are intensifying as the implications are being realised. This new crisis comes despite the current efforts of the NHS to find £20bn worth of savings. Further productivity gains will be even harder to find. It is therefore crucial to take advantage of potential savings that could be made by addressing the excessive cost of PFI.

At present we will spend around £80bn of public money on hospitals that cost £12bn to build. So far £14.5bn has been paid over. Given that many of these deals have been criticised for their poor value then there is a strong case for making more effort to reduce the future costs. This could help to release the pressure on our hospitals. In real terms taking action on PFI could prevent large service cuts, stop PFI debts from distorting local planning and lessen the call on taxpayers for extra funding. 

What are the risks of non-action on PFI?
  • More trusts will be forced into making large cuts in services and staffing by their unaffordable PFI deals. These hospitals will be the most exposed during periods of funding pressure as PFI costs rise year on year;
  • More PFI hospitals will need longterm government assistance to remain “viable”. The link between PFI and debt has been proven. It is inevitable that more trusts will be sucked into a cycle of deficit;
  • PFI debt will lead to further controversial reconfiguration plans, affecting other hospitals and will distort health planning;
  • More NHS funding will be drained off in excessive PFI profits and tax avoidance, at a time when “hard choices” are being proposed to the public due to NHS funding pressure;
  • Further NHS trusts will take on PFI commitments that are unaffordable;
  • Loss of control of hospital buildings and land;
  • Loss of international financial credibility.
Political risks of not acting on PFI
  • A future Labour government could be blamed for the negative impacts of PFI as they continue to affect hospitals and their patients. The plight of struggling hospitals will continue to attract media coverage. PFI started under John Major’s government, but was vastly expanded under Labour and without further action it could be that Labour takes the blame;
  • As PFI costs rise the next government will have to prop up PFI schemes to an even greater extent. This could be viewed as unacceptable waste at a time of heightened sensitivity around public spending;
  • PFI debt worsens the financial position of the NHS, adding weight to the argument that the funding model of the NHS is unsustainable and that the public should be charged directly for more services;
  • Public awareness about the problems of PFI is increasing, non action will guarantee future criticism;
  • Unpopular reconfiguration driven by PFI debt will fuel public criticism and will be a spur for public campaigns.
What are the benefits of taking action on PFI?
  • Taking action on PFI will create considerable savings, releasing pressure on 100 NHS hospitals;
  • It will provide an opportunity to develop new forms of procurement which will provide more services for the sums invested;
  • Action on PFI is a key part of the plan to repeal the market, save the NHS and promote its long term security;
  • Taking action will prevent further hospitals from falling into debt crisis and prevent Lewisham-style controversy around local cuts;
  • Gain votes in marginal constituencies as failing hospitals with PFIs are in a number of these;
  • Visible action to reduce corporate exploitation of public contracts and tax avoidance are both popular with the public and could help to generate public funds.
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