Where does the end of PFI leave PPP?

There was an inevitability about the end of private finance initiative, announced by the chancellor in the recent Budget. It followed another flare up of PFI related crises across public infrastructure projects, reminding us of its inauspicious legacy, and leading to growing concern about how to extract public services from its tentacles.

The high profile failure of Carillion, which put large scale projects such as the Royal Liverpool in jeopardy, and the news that Norwich and Norfolk has joined the list of acute trusts plunged into financial turmoil have done nothing to help PFI’s survival.

Its younger brother, PF2, which was announced by the coalition government in 2013 and largely ignored by government departments too nervous to take the risk, also bites the dust.

No one in Westminster was particularly surprised by the news. The government is in a politically precarious position and can do without unnecessary controversy in the run up to Brexit. But there was a flurry of confusion across the chamber after the chancellor sat down.

A number of MPs signed a House of Commons motion celebrating the demise of both PFI and public private partnership, which must have been a surprise and a shock to those overseeing smaller public/private sector deals already in the works.

Delivering value

A week later, we have more clarity. Health minister Stephen Barclay has replied to a question from Labour MP Stella Creasy saying that, whilst the PFI model has been proved to be “inflexible and complex”, the government is committed to PPP “where it delivers value for the taxpayer and fairly transfers risk to the private sector”.

So can we assume all is well for PPP schemes, such as Local Improvement Finance Trusts in primary care, and for larger scale initiatives which are to be pushed forward under Project Phoenix? That remains unclear.

Local bodies have to be willing to make investments now in order to achieve longer term sustainability, something which can be difficult to justify in already complex and costly estates management

Most LIFT Cos have been successful in creating a sustainable partnership between Community Health Partnerships and the private sector. They have avoided the problems encountered by PFIs because contracts and shared investment have created a careful balance of control and responsibility between the investor and Community Health Partnership.

But has growth stalled? There are 50 LIFT Cos currently in operation across the country and the Department of Health and Social Care is keen to see a greater take up of the model. It is hoped that more will become clear when the successful Wave Four Sustainability and Transformation Partnership capital bids are announced, possibly before Christmas.

Project Phoenix was conceived with the intention of reinvigorating medium to large healthcare estates under the Five Year Forward View in 2015 but it is still waiting in the wings almost three years later and this announcement could pose its biggest threat yet. Two general elections, a cloud of political uncertainty and seasonal pressure on frontline services have meant that the initiative has taken a back seat.

Whilst there is some enthusiasm at a local level for larger PPPs, we do not know when they will be able to go ahead, leaving local STPs unable to plan for future provision and private sector investors considering how long they can afford to wait. It is possible that, given the current political climate, the government will be nervous about green lighting larger, potentially headline grabbing, investment projects so soon after the end of PFI.

The uncertainty will not be welcomed by the newly created Strategic Estates Planning and Implementation team, which sits in NHS Improvement and aims to provide guidance and encouragement for STPs looking to finance modern and adaptable estates initiatives. They recognise that when it comes to bringing in new investment models, confidence is the key.

Local bodies have to be willing to make investments now in order to achieve longer term sustainability, something which can be difficult to justify in already complex and costly estates management.

But at the same time, it is difficult to imagine a future without PPPs. The longevity of models such as LIFT demonstrate that, done correctly, PPPs offer a flexible and sustainable environment for dynamic services, at a time when GPs are less inclined to buy into career long partnerships.

As money from NHS land sales is diverted into services, it seems inevitable that the NHS is going to need to locate funding from outside government if it wants to build modern and future resilient buildings. And LIFT Cos show that this is achievable. It is time for STPs to commit.