No more PFI deals, chancellor announces

The government plans to abolish the use of private finance initiative deals for future capital projects, and establish a “centre of best practice” to manage its existing NHS schemes.

In his budget speech, chancellor Philip Hammond said there was “compelling evidence” that PFI deals do not deliver value for tax-payers or genuinely transfer risk to the private sector.

However, it is unlikely that the government will abolish all kinds of “public-private partnership” deals, as its long term investment plans are predicated on around £3bn coming from private sector investment.

The government is also currently assessing a business case for a type of PPP between the NHS and private companies to deliver major capital projects, known as regional health infrastructure companies.

The budget document referred specifically to PFI and PF2 projects, saying they had proved “inflexible and overly complex”.

This represents a reversal of previous statements by Mr Hammond, who in 2016 said the government would develop a “new pipeline of (PF2) projects”.

The announcement follows calls from Labour to nationalise existing PFI and PF2 deals. Mr Hammond ruled out this option, saying it would cost too much to buy the contracts out.

Instead, the chancellor said a new “centre of best practice” will be created in the Department of Health and Social Care to “improve the management of existing PFI contracts”.

HSJ understands that some work has already been carried out nationally by a handful of staff to assess where there is scope for savings to be made. It is unclear to what extent this would be expanded under the new plans.

Creating a central team to manage projects was one of the options assessed in a report by the Centre for Health and the Public Interest earlier this month, which said it could deliver around £15m of annual savings.

Around 100 trusts have PFI contracts, with some carrying interest rates of more than 10 per cent. Four trusts’ annual repayments equal more than 5 per cent of their turnover.

In his 2017 report, Sir Robert Naylor said around £10bn was needed to transform the NHS estate. In response, the DHSC suggested that around £3bn of this would come from private sector investment.