NHS ‘leaking money’ through expensive PFI contracts, says think-tank

30 Aug 17

Government money is “leaking out of the NHS” through profits made by private finance initiative companies, a think-tank has claimed. 

A report by the Centre for Health and the Public Interest, out today, has noted between 2010 and 2015 companies running PFI contracts, to build and run NHS hospitals, made pre-tax profits of £831m.

Recommendations in P.F.I Profiting from Infirmities include recouping some of the excess profits through taxing PFI companies and capping the amount of profit which can be made by a private company.

CHPI Co-Chair Colin Leys said: “This report shows for the first time the huge amount of taxpayer’s money which is leaking out of the NHS through the profits generated by PFI companies.

"Given the extreme austerity in the NHS where patients are being denied treatment and waiting times for operations are rising the government needs to take action to stop this leakage of taxpayer funds out of the NHS.”

The report had not been able to establish the high borrowing costs the NHS has to pay to PFI companies on top of these profits, he added.

Mark Hellowell, senior lecturer in health policy at the University of Edinburgh and PFI expert, said: “This report tells us that a large fraction of these costs are being taken as profits by special purpose vehicles, many of which earn very high returns relative to the risks they bear."

CHPI researchers claimed over the next five years a further £973m is expected to be paid out to PFI firms in the form of pre-tax profits on PFI schemes – equivalent of 22% of the £4.5bn the government has pledge to invest into the NHS over the same period.

The think-tank stated there are currently 125 PFI contracts with private companies overseen by the Department of Health.

The capital value of the assets which have been built is £12.4bn. However, over the course of the life of the contracts, the NHS will pay in the region of £80.8bn to PFI companies for the use of these assets.

Hellowell said central government needed to support NHS providers "with more financial support, and use their market power to renegotiate contracts and bring down excess costs wherever possible".

The Department for Health has disputed the claims saying the NHS was ranked the most efficient healthcare system in the world by the Independent Commonwealth Fund.

A spokesperson said less than 3% of the NHS’s annual budget was spent on PFI.

"The NHS is recognised by the independent Commonwealth Fund as the most efficient healthcare system in the world and currently spends less than 3% of its annual budget on PFI," she said. 

She added as the report analysed six years of contracts and the first PFI contracts for NHS hospitals, which were signed in 1997 and range between 25 and 30 years, the report "does not represent the full picture".

The report makes the following recommendations:

  • Use public sector loans to buy-out PFI contracts
  • Tax PFI companies to recoup some of the excess profits which have been made
  • Cap the amount of profit which can be made by a private company which has an exclusive public-sector contract with the NHS
  • Share out the profits made from sales of equity stakes in PFI contracts
  • Mandate greater transparency of equity sales to prevent the unnoticed consolidation of market power by a few investors
  • Re-negotiate the contracts with the private companies to reduce the amount that the NHS pays

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