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Ministers should reverse a ban on using private finance to build NHS hospitals in England in order to fix a “broken” capital investment system that has left the service struggling with dilapidated estates, according to health leaders.
In a report on Tuesday, the NHS Confederation called on the UK government to emulate a Welsh government initiative to expand private sector involvement in the development of health infrastructure.
“The NHS capital regime is broken,” the report said, warning that the £3.1bn increase in capital spending in the autumn Budget was £3.3bn short of the amount required for the health service to meet its new 2 per cent productivity growth target.
Matthew Taylor, a former adviser to ex-Labour prime minister Sir Tony Blair and now chief executive of the NHS Confederation, said one option to “bridge this gap” would be to allow new routes for private investment.
Taylor said such a move would “not mean throwing open the doors to private finance, but creating the environment where the NHS has more options for raising the vital funding it needs”.
Private finance initiatives were launched in the early 1990s to let UK public sector authorities build schools and hospitals through borrowing from banks and other investors, which would then maintain the assets over decades.
The financing strategy was widely used during Blair’s 1997-2007 government but the Conservatives ended the practice in 2018. In a report that year, the National Audit Office, the public spending watchdog, found taxpayers had incurred billions of pounds in extra costs for no clear benefit through PFI deals.
However, local authorities have continued to use PFI directly for transport and other projects, and a handful of public-private partnerships in Wales are being delivered under the Mutual Investment Model.
These differ from the traditional PFI model in that the public sector has a stake in projects, improving governance and transparency. Soft facilities services such as cleaning and catering are also often excluded from contracts and there are tougher social value and environmental targets.
The Labour government has also indicated its willingness to restart PFIs and is weighing private sector financing of the Lower Thames Crossing, a new £9bn road and tunnel planned to the east of London.
The report by the NHS Confederation, which speaks for health managers in England, comes after a government-commissioned review last year found England had spent £37bn less than peer countries on health assets and infrastructure since the 2010s.
This shortfall forced the health service to raid capital budgets in order to manage day-to-day spending, leaving the service with crumbling buildings and an accumulated maintenance backlog of £13.8bn, the highest on record.
The report on Tuesday said what money was available to NHS trusts for capital spending was “all too often tied up in red tape, undermining people’s care, their experience of services and taxpayers’ value for money.”
It recommended that the government and NHS England streamline processes for approving new construction projects in the health service and devolve decision-making.
A Department of Health and Social Care spokesperson said: “This government inherited a broken NHS, and Lord Darzi’s investigation found that capital investment has been neglected, with the hospital estate left to crumble.
“That’s why we announced a £26bn increase in health and social care funding at the Budget. This funding package included the highest capital budget in real terms since before 2010.
“We are making sure every penny of extra investment is well spent, so that all patients receive care in buildings that are safe and fit for purpose.”
Data visualisation by Amy Borrett
