Recent shelving of a flagship PFI venture in West London may herald the end for the PFI healthcare experiment in the UK

Oct 9 2005

Government enthusiasm for the Private Finance Initiative (PFI) in the health service - private sector investment in hospital building projects - may be dropping because of its high cost, says an editorial in this week's British Medical Journal.

Hospital trust boards initially welcomed the financing system, which they were told was the major way they could fund new facilities, paying investors back in annual instalments.

But concerns were soon raised that new PFI funded projects were providing less patient capacity than those they were designed to replace. PFI contracts also seemed very expensive, though details on costs were "shrouded in commercial secrecy", says the author.

The House of Commons Public Accounts Committee recently questioned the "large profits made by the private contractor which built the Norfolk and Norwich hospital", says the author. And the recent shelving of a flagship PFI venture in West London may herald the end for the PFI healthcare experiment in the UK, he suggests.

The fundamental problem is that PFI does not suit the rapidly changing climate of delivering healthcare in the UK, says the author, as private investors need long-term commitment from hospital managers – commitments increasingly unwise for trust boards to make.

The final blow could be the Government's own economic operating constraint that debt should not exceed 40% of gross domestic product. Hospital repayments to PFI investors have always been treated as "off balance sheet" finance - not registered in public accounts. But this may soon change if the Government's Office for National Statistics reclassifies PFI investment, since much of it may be categorized as debt – and at levels possibly breaching the Government's own economic condition, says the author.

This would remove a key justification for PFI in healthcare, since a financing system which incurred heavy debts on the Government balance sheet overturns the argument for having PFI in the NHS at all, he concludes.