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As UK’s NHS Drowns in PFI Debt, Private Healthcare Providers Offer to Lend a Helping Hand (sarc)

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“The scale of the expansion being considered would surpass moves made by the Blair government, which first introduced use of the private sector by the NHS.”

Chronically under-funded and over-indebted, the UK’s National Health Service (NHS) appears to be coming apart at the seams. While the Keir Starmer government refuses to pour new funds into the declining health service until major “reforms” are enacted– which will primarily involve outsourcing even more of its services to the private sector — the costs to repair many of its crumbling buildings are spiralling. According to an article by Morning Star, the total repairs bill for NHS facilities in England surged to £13.8 billion in 2023, up by a fifth on the previous year:

Costs amounting to £3bn were attributed to “high-risk” repairs, which could cause injury if left unaddressed.

“Vital bits of the NHS are literally falling apart after years of underinvestment nationally,” said NHS Providers deputy chief executive Saffron Cordery. “The safety of patients and staff is at risk.”

The spiralling maintenance backlog outstrips the cost of running the NHS estate itself, which also increased by 11 per cent to £13.6bn…

Last month, a report into the state of the health service by Lord Darzi revealed Britain had spent £37bn less on the NHS between 2010 and 2024 than comparable countries in the Organisation for Economic Co-operation and Development.

To make matters worse, the NHS is now being offered a helping hand from the same private hospitals that want to dismember it. Last week, The Telegraph reported that the government is considering taking up an offer from the private sector that would see cancer checks, surgery and intensive care for NHS patients increasingly taking place in private hospitals. Just as we warned during Starmer’s first week in office, his new Labour government is certain to continue, if not intensify, the piecemeal privatisation of the NHS.

From the Telegraph piece:

The NHS has been pleading for extra funds ahead of the Budget on Oct 30, but in his first speech as Health Secretary, Wes Streeting vowed to end “the begging bowl culture, where the only interaction the Treasury has with the Department of Health is ‘we need more money for X, Y and Z’”.

Under the plans, submitted by private hospitals, the independent sector could treat up to 2.5 million more patients, with some treatment starting in weeks…

The Independent Healthcare Providers Network (IHPN), which represents private hospitals, including groups such as Bupa, Circle Health Group and Care UK, has written to the Chancellor and the Health Secretary saying that more than £1 billion of private sector capacity could be invested into facilities for NHS patients…

The scale of the expansion being considered would surpass moves made by the Blair government, which first introduced use of the private sector by the NHS.

Bought and Paid For

Unmentioned in the article is the that Streeting has received £175,000 from donors linked to private health firms. Collectively, the Labour government’s cabinet ministers have raked in more than £500,000 in donations from firms with links to the sector, including lobbies representing some of the largest private healthcare corporations in the US. This sort of information often gets overlooked in mainstream media articles about the Labour government’s plans for the NHS.

Given who their backers include, it should hardly come as a surprise that Streeting and his cabinet colleagues are reportedly “very interested” in the private sector’s proposals. Streeting has repeatedly pledged to outdo Tony Blair, his mentor and idol, in deploying the private sector in the provision of NHS care. “If you want to understand my appetite for reform, think New Labour on steroids,” he said in a speech in May. And he seems to be keeping to his word.

In his mission to accelerate the privatisation of the NHS, Streeting will be able to count on the experience and expertise of Alan Milburn, who is to be given a lead role in the Health Ministry. During his four-year stint as secretary of state for health (1999-2003) under Blair, Milburn did more than just about anyone to advance the privatisation of the UK’s health system.

The former health secretary, like the current one, is a fervent believer in using private healthcare to tackle the NHS’ ever-growing treatment backlog, and has raked in millions as a consultant to some companies with interests in the sector. As The Guardian puts it, this “could trigger claims that his role at the DHSC puts him at risk of being exposed to conflicts of interest between his public and private sector activities” — as if that isn’t the basic model of governance in the UK today.

Resuscitating PFI

Milburn was also the first health secretary to begin applying the disastrous Private Finance Initiative (PFI) to NHS infrastructure projects. Three decades later, the single biggest financial burden for many NHS trusts is the regular payments they must make for buildings constructed and maintained via PFI. As the FT noted a few days ago, PFI has saddled many local authorities and NHS trusts with “crippling debt repayments.”

Under PFI, instead of borrowing to build, the government began contracting with private sector firms to finance, design, build and maintain public assets, including hospitals, schools, roads, prisons, street lighting and military equipment. The contracts typically run for 25–30 years, and many of them are coming to an end soon.

The only real advantage of PFI is that it allowed government to harness vast sums of private capital to invest in public projects, such as roads, new schools and hospitals, without paying any money up front, allowing it to keep the level of current public debt lower than it would otherwise be. But the costs of servicing that debt are significantly higher than is typically the case with public debt.

In 2018, PFI was finally scrapped after the collapse of one of its biggest beneficiaries, the construction and facilities management services firm Carillion. In total, some 700 PFI contracts with a capital value of £57bn were signed between the mid-90s and 2018, mainly by Labour governments. Around £140 bn has been paid for their use and maintenance and another £160bn is still owed, according to the Kings Trust, a public health think tank.

As the FT puts it, PFI was ultimately deemed to be “poor value” for taxpayers, which is one hell of an understatement (more on that later).

Yet there are signs that PFI is being resuscitated — this time in the form of the £7.3 billion National Wealth Fund which aims to finance big infrastructure projects like ports (Special Economic Zones?), gigafactories, green hydrogen and carbon capture by generating £3 of private sector investment for every £1 it invests while providing government guarantees of returns to investors. As Lord Prem Sikka, a Labour peer, explained in a recent speech to the House of Lords, the resemblance to PFI is uncanny:

Some warn that what the government is planning could be even worse than PFI. As Daniela Gabor wrote in The Guardian in July, to mobilise £3 of private capital from institutional investors, the government is pledging to offer them £1 in public subsidies. Whereas in the original model of PFI, private companies built and managed public services while leasing them to taxpayers for a pre-determined period of time, financiers now plan to own our infrastructure outright and transform it into a source of steady revenue — all underpinned by government guarantees.

The likes of BlackRock, which recently bought Global Infrastructure Partners, wants the state to “derisk” investments by guaranteeing returns, warns Gabor: “This financial jargon was included in the 2024 Labour manifesto, and it in essence involves the state stepping in to improve the returns on infrastructure assets.”

In a recent interview with London Broadcasting Corporation, John R Lister of the campaign group Keep Our NHS Public said that if the Starmer government took up the Independent Healthcare Providers Network’s offer of “help”, it would be even worse than what happened with PFI:

“It’s like PFI, only worse in the sense that at the end of PFI, however extortionate that was — all the private money to build hospitals, costing an extraordinary amount on top of what it would have cost to do it properly through public funding — at least at the end of the day, with PFI, you do wind up with a hospital, whereas with this it’s a billion pounds that the private sector puts up. And then you’re dependent for the rest of time to actually send large numbers of NHS patients to the private sector. This is a lose-lose for the NHS.”

According to the FT, the Labour government is being urged by investors to launch a new version of PFI after a review by former Siemens CEO Jürgen Maier backed the model:

Former Labour minister Lord Hutton believes an amended version of PFI could work for future projects. This could include the Welsh model, where the government or local authority takes an equity stake and investor returns are capped.

Water regulator Ofwat is also encouraging utilities to use a similar model called “direct procurement for customers” for £14bn of new infrastructure.

Lord Hutton heads the Association of Infrastructure Investors in Public Private Partnerships, a new organisation representing PFI investors. With many PFI contracts scheduled to come to an end over the next few years, the association was set up to encourage public-private collaboration to avoid costly legal wrangles. As the King’s Trust warns, concerns are rising about just how messy things could get if the government doesn’t step in:

“Everyone is worried about how these contracts will finally end: those in the public sector who hold them; the PFI industry itself; the National Audit Office; and the [government’s Infrastructure and Projects Authority], which is the government’s centre of expertise on PFI and all other major projects.”

The big question is whether the government is doing enough to provide the huge amount of support that individual hospitals, schools and others are going to need to avoid what the Financial Times dubbed ‘a bitter end’ to the UK’s use of the private finance initiative…

PFI has been controversial for a whole variety of reasons. But one real attraction was the obligation to maintain these hospitals and other assets well so that they would be handed back to the public sector in fine working order.

This was attractive not least because governments of all colours tend to cut capital expenditure, which includes maintenance, when times are tight. This has led to a bill for backlog maintenance in the public sector of at least £37bn. Some £10bn of that is in the NHS. As a result, areas involving patient treatment are being closed ‘all the time’,  NHS England told MPs recently.

In addition, as cash-strapped hospitals and others have sought to manage their PFI contracts more vigorously – looking for reasons to make deductions from the annual payments because of defects – relations have deteriorated.

According to the IPA’s report by two independent PFI experts – the White Fraiser report – this has spawned ‘a lucrative and self-perpetuating disputes advisory market’. One in which the advisers make things worse by seeking to win for their side ‘at all costs’. Hence increasingly toxic relationships, most notably in the health sector.

While there is plenty of guidance on managing the end of a contract, and some central support, the fact remains that these exit negotiations are still being done by individual hospitals and others, usually by people who have not done this before and are likely only to do it once, while the PFI industry has always been more concentrated and hence more expert. To the outside eye, this looks like a less than balanced equation. 

A Decades-long “Fraud on the People”

The PFI began life back in 1992 when then-Chancellor (and former steering committee member of the Bilderberg Group) Kenneth Clarke set up a PFI panel that evolved into a taskforce inside HM Treasury and was eventually rebranded as Partnerships UK. As The Independent recounted in its long-form article, “The Great PFI Heist,” various executives from big banks “appeared on secondment. It was later privatised with the shares sold off to financial institutions including Barclays, HSBC and RBS.”

PFI and its second incarnation, PF2, allowed construction firms to charge absurdly inflated costs while bankers and financial consultants were able to gorge on massively inflated interest rates and fees for run-of-the-mill infrastructure projects. Meanwhile, public institutions like the NHS were saddled with debts they would struggle to repay over the course of decades. It was, put simply, “a fraud on the people”, as even Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), admitted on BBC1’s Question Time in 2018:

The government can borrow money more cheaply than anyone else, and therefore if you’re going to hand over the total provision of a hospital to someone whose borrowing costs are going to be higher than yours, what is the advantage of doing that? Unless you’re absolutely certain they’re going to be much more efficient. And if you think they’re going to be efficient, why not give them a fixed price contract? Why hand over the whole thing?

I think PFI has been a fraud, and there has been a very interesting report by the National Audit Office today which shows just how much we have paid for the privilege of the Private Finance Initiative.

By the time PFI came to an end, in 2018, the government had coughed up roughly £110 billion in fees and interest. Yet it would still have to pay investors and companies another £199 billion between April 2017 until the 2040s for existing deals — working out out at a total outlay of around £309 billion for 700 projects worth a measly £60-something billion.

For successive governments (though most certainly not their voters), the benefits of PFI and its successor scheme, PF2, were obvious: they allowed ministers to harness huge sums of private capital to invest in public projects, such as roads, new schools and hospitals, without paying any money up front or bringing it onto its balance sheet — thus keeping the level of current public debt lower than it would otherwise be.

What Sir Howard Davies didn’t mention on Question Time is how his bank and others like it had helped set in motion this historic heist. As the researcher and campaigner Joel Benjamin of The People vs PFI wrote a few years ago, “Politicians did not simply wake up one morning and declare that banks should finance and own schools and hospitals, off-balance-sheet, via offshore tax havens; they were lobbied by City interests, prior to the implementation of PFI.”

Now, something similar could be about to happen, albeit with large infrastructure projects in the logistics and green energy sectors. PFI could soon be brought back to life, in what can only be described as the definition of financial madness.

 

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24 comments

  1. James E Keenan

    Is there anything that non-elite, non-neoliberal people in the United States can do to help forestall the collapse of the NHS in Britain?

    1. Samuel Conner

      I have difficulty imagining effective ways to influence policy in the near term.

      Longer term, educating the public about how monetary sovereign finance actually works could make it more difficult for governments to justify austerity policies on the rhetoric of “we can’t afford it.”

      If you have contacts in UK, you could point them toward the work on Modern Monetary Theory of people like Warren Mosler, Randall Wray, Bill Mitchell, Stephanie Kelton, and others. Kelton has been especially active in efforts to educate the public, for example her recent book “The Deficit Myth” and documentary film “Finding the Money.” I have the impression that another book is in preparation.

      —

      My cynical opinion is that the rulers of monetary sovereign nations already understand MMT pretty well. But the rhetoric of “the government doesn’t have enough money to do everything it would like to do” is very useful in restraining spending on things that the rulers prefer to not do, such as prioritize real resources toward population health rather than toward power agendas (war, enriching themselves, etc.). So educating the rulers about MMT will accomplish very little. But educating the people might make a difference in the medium and long term. There is still an appearance of democratic process needed to maintain the appearance of the legitimacy of the existing power arrangements, and the citizenry could, in principle, attempt to overthrow those arrangements at the ballot box.

  2. Colonel Smithers

    Thank you, Nick.

    Private equity leaders comprise the largest group in the circle of advisers put together by the Blair organisation to advise Starmer in opposition and government.

    Nick concludes with: “Now, something similar could be about to happen, albeit with large infrastructure projects in the logistics and green energy sectors. PFI could soon be brought back to life, in what can only be described as the definition of financial madness.”

    It’s worse than that. Labour wants the City, but really private equity, which is rarely based in the square mile, to deliver public services, staff oversight of such services and second staff to manage delivery.

    I don’t know what will be left of the British state and its capacity after this government, much less the people. 2029 and a Con(servative)(Re)Form government can’t come soon enough, perhaps.

    My EU bank employer, the last acquisition made by RBS before its collapse, is increasing its exposure to private equity in the UK.

    I remember watching that Question Time live. It was held in Manchester, where Burnham remains mayor. Neoliberal Andy Burnham was often out of his depth and made a remark that provoked Davies to reply that, unlike the scouser Burnham, Davies was born and raised in Manchester.

    1. schmoe

      As an American, I was always surprised how the NHS was able to avoid being overrun by locusts from the City (or PE, if there is a distinction as you note) in a country that is as financialized as the United States. Perhaps the UK is not as corrupted by campaign donations, although this article notes that is indeed an issue, but I suppose it was a matter of time until the NHS was looted.

  3. Froghole

    Like the Bourbons in 1814-15, Milburn (and his hardline neoliberal acolyte Streeting) have ‘learnt nothing and forgotten nothing’. They know full well PFI is a pig (though they are paid to think otherwise), but they have now created something called ‘hybrid PFI’, which is the same pig but with a fresh application of lipstick.

    Per Denis Healey, “who is the Mephistopheles behind this shabby Faust?” Not merely the odious Blair but more especially Reeves and Bowler (with Bailey in support). Just as Clarke intended PFI to ‘scrub’ the public finances after the ERM rout, so Reeves needs to move spending off balance sheet in order to moderate the quantum of tax rises and spending cuts in the near/medium term, so that Labour’s ramshackle coalition can be kept together. They need to do this because they fear another gilts strike – a risk which (in their eyes) has been amplified by the Barnier/Le Maire budget, which is aimed at making €60bn of tax rises and spending cuts (about evenly divided between the two), compared with only £40bn of tax rises and spending cuts in Reeves’ projections.

  4. ciroc

    If I were a presidential candidate, I would promise that Americans would soon enjoy the same level of health care as the British.

    2. JonnyJames

      I’m a Yank, but I will never forget my experience with the NHS. While flying from SFO to Heathrow I started to feel quite ill. As a precaution, the crew contacted an NHS mobile medical team to examine me upon arrival. They ran an EKG, and did some other tests. I was given a clean bill of health.
      Then I panicked: I imagined I would receive a bill for thousands (like in the USA) when I asked the paramedics how much would I be billed? They both chuckled for a split-second, then the lady smiled and said something like: “don’t worry love, this is the NHS, it won’t cost you a penny”

  5. jefemt

    Oh, if only we still had civics in high school curriculum. Could be a module on tax policy, regulated public utilities, what constitutes a legitimate public utility in a moral nation state, and the notion of political will and political won’t.
    The US is miles ahead of England in grift, cronyism, and private hands in public coffers.
    Greed is Good, Government is bad, Mr. Market is infallible.
    Ivy league trained bankers, lawyers, and politicians have the broad general public’s interest at heart.

    Sheezus.

  6. JohnA

    Nigel Lawson, one of Thatcher’s longer serving and most prominent finance ministers, once said that the NHS was the religion of Britain, reform it at your peril. But that was in the 1980s when politicians still took heed of the electorate and voting intentions, with pre-Blair, at least some daylight between the Thatcher Conservatives, and if not socialist, at least somewhat social democratic Labour. Now, there is uniparty consensus between Labour and Conservative, both forever trying to outmarch the other rightwards and as a consequence, the electorate is totally ignored. The choice: shit sandwich or shit sandwich? Both members of the uniparty only care about their donors.
    Hence, though the electorate in Britain want a decent health service, decent education, decent transport, decent provision of energy and water etc., all of which, are better provided when there is no direct profit motive, they are completely ignored. The so-called will of the people is absolutely and utterly irrelevant today.

    1. Colonel Smithers

      Thank you and well said, John.

      With little difference in popular support according to party affiliation.

    2. Felix_47

      I wonder if the ethnic transformation of the British population has frayed the bonds that held the society together in the past. One group that is at the top secures its needs and disregards the needs of those below. Votes are decided by propaganda and outward appearances. Kind of how Indian society works but a lot less dramatic as in India. Brahmins at the top and untouchables at the bottom. Destroying the NHS may well destroy any community within the nation. The NHS was a model for what the US could do. What a tragic history.

  7. The Rev Kev

    This is nothing short of high tragedy seeing such a great institution be pillaged and ransacked for the benefit of a tiny group. As a result you will have thousands extra of Brits dying each and every year and you will see the rise of a phenomenon usually associated with the US – medical bankruptcies. I predict that the mood of the Brits will be very foul by the time of the next general election with no prediction how that could turn out. I think too that many will be out for blood and will take it out on the Tories and Labour.

    1. Anonymous 2

      Thank you all for your comments. There is a real danger that the UK will turn to Farage in 2029. He is a conman and grifter par excellence. Chums with Rupert Murdoch. He would be a frontman for some very dark forces IMO.

      1. Ignacio

        The Argentinians have to stomach Milei and quite probably you might have to stomach Farage. Signs of the times we are living. Establishment parties may not like these populists but they are exactly the causal agents making them mushroom. If only for once they start to worry about the needs of the populace at large… not that privatization of health care goes in the right direction precisely.

  9. Ignacio

    Attempts of privatization of public health services are not unique of the UK though I guess the push there is more advanced via those financial schemes “PFI”. Here in Madrid, at the administrative level of the Comunidad Autonoma (these administrations handle Public Health and this fact alone has fractured a system that should be central), is where the privatization effort is more advanced. I feel solidarity with the Britons with this issue. I can only hope these PFIs will not be mirrored here. Here it is all done through public-private contracts. In Catalonia where Nick lives 22% of the Healthcare budget goes to such contracts. Catalonia is very “advanced” in this sense. Advancing backwards of course.

  10. JonnyJames

    Great piece, this para sums it all up nicely

    “…PFI and its second incarnation, PF2, allowed construction firms to charge absurdly inflated costs while bankers and financial consultants were able to gorge on massively inflated interest rates and fees for run-of-the-mill infrastructure projects. Meanwhile, public institutions like the NHS were saddled with debts they would struggle to repay over the course of decades. It was, put simply, “a fraud on the people”, as even Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), admitted on BBC1’s Question Time in 2018:..”

    That sounds so familiar, history rhymes and all that. In the local parlance: “they runnin game on us”.

    Once the NHS is finally broken up, fully privatised, and the UK is almost identical to the US health extortion racket, the only thing left separating the two nations will be regional accents and real pubs serving hand-pulled, cask-conditioned Real Ale. May that day never come!

  11. bertl

    Le’s assume for one moment that Trump becomes President, NATO and the EU crack up, we go through another financial crisis and BRICS and the SCO are the strongest games in town, and the UK, along with other countries, decides – under threat of a violent populist revolt or not – to deal with the financial crisis the way it should have been dealt with in 2008 by letting insolvent firms, including banks, go to the wall, central government and local authorities taking over their assets, with the existing protections for bank depositors and the creation of public utility banking services, a waiving of customer debts to private utilities, and the use of existing laws to pursue cases against companies and intergovermental agencies, their directors and senior managers and dole out the appropriate punishments, wouldn’t that lead to the almost total cleanup of the system and an effective nod to the opportunities offered by a Jubilee? In fact, is that not be the only basis of a future Jubilee or, if you prefer, an economic, social and political revolution favouring the many and not the few, and shoudn’t it be something we must plan for to ensure a reasonable future for all in a world which might just enable the bulk of humanity to survive climate change? Or is this just another of my Friday night John Lennon moments?

  12. Paul Greenwood

    NHS funding is of dedicated to medical treatment of patients. In fact on Daily Sceptic are links to two NHS doctors who broke down NHS Budgets revealing how much is siphoned off into quangoes and Political groupings and not used to benefit patients.

    Politicians have hidden all kinds of self-serving entities within the budget. If you want to see overpriced health outcomes look to Germany which unlike U.K. has no central waiting list but simply no records that it takes 6-12 months to see a cardiologist and a psychotherapist at least half a lifetime. Kassen restrict catalogue of treatments and raise premises above 15% income

    All Western health systems are in trouble but read the Commonwealth Fund of NYC Report

  13. Guy Liston

    The English, a most especial class of morons, just where shall I start? Hard to say , just so very much to consider, get back to you soon but, please, don’t wait up, it’s quite a long list, Mike Liston

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