PFI Again


The Private Finance Initiative is in the news again as Barts with a huge PFI hits financial trouble.

The total cost of all PFI schemes in the NHS is £2bn.  Around £1bn of that is payments for facilities management services.  The total expenditure of the NHS is £110bn.

If all PFIs were somehow “nationalised” there would still be facilities management costs, repairs and renewals but perhaps they could be provided in house less expensively.  So perhaps £1.3bn could be “saved”.

The possibility of simply nationalising all the PFIs is remote (to say the least) – it would require all kinds of legislative change and possibly even exit from the EU.  Anyway it is not politically doable any time soon. So the recourse is to renegotiate, something that has been done with PFIs outside the NHS with some success.

There is some vague idea of “fair value” which is the amount that would have to be paid if the PFI schemes had not been used and the normal public sector approach adopted.  This approach has been used in the NHS in order to calculate a subsidy which is being paid to some Trusts which have significant problems (the balance is met out of central funds so still a charge on the NHS as a whole).

But if all PFIs could be renegotiated back down to “fair value” and the facilities management aspects also bargained down to a better deal then savings of the order of hundreds of millions could potentially be made.

That is say £500m out of £110bn or about 0.5%.  Worthwhile but actually small even in relation to the current immediate funding gap in the care system of perhaps £3bn – £5bn and growing.

Even to achieve these savings would require the kind of negotiating skills that are notably absent in the NHS.  But the policy of first centralising the PFI debts and managing the renegotiations centrally then levying a fair charge on the Trusts is logical.

For a small number of Trusts, like the appalling scheme at Peterborough and Stamford,  PFI is a major issue.  But it is easy to distort the impact of PFI on the NHS as a whole and to exaggerate the potential for savings.  There are many more pressing and more significant issues to resolve.

In fact little of any value has been said about PFI since 2001 with Jon Sussex’s paper for the Office of Health Economics “ – The Economics of the PFI Initiative in the NHS”, although John Lister’s work for Unison also provides many valuable insights and facts.