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A new generation of local NHS clinics in England will once again be built using hundreds of millions of pounds in private money, in a step that echoes the controversial Private Finance Initiative (PFI) policy.
Rachel Reeves will use her Budget on Wednesday to announce 250 neighbourhood health centres, some of which will be privately funded, bowing to pressure from health chiefs to trial new ways of raising cash for modern facilities.
NHS bosses have long pushed to be allowed to make greater use of external capital, including to rebuild hospitals and other large-scale projects.
But the Treasury has until now resisted. The change of heart will face fierce opposition from Labour MPs who have argued that reintroducing PFI, or a version of it, risks undermining confidence in the party’s NHS reforms.
The initial deals, which will count against the government balance sheet, are described by government sources as a “toe in the water” of private finance and justifiable on grounds of efficiency and speed.
They could, however, embolden NHS chiefs to press for bigger, more polarising private finance models.
Reeves described the funding plan as a way of “driving down waiting lists by bringing healthcare to patients’ doorsteps and turbocharging NHS productivity with cutting-edge technology”.
Investors will be awarded long-term contracts to design, build and manage local NHS centres that could provide outpatient services such as X-rays or MRI scans, with the aim of having one in every community by 2035.
Centres in the most deprived areas will be built first under plans set out in Department of Health and Social Care documents as previously reported by the Financial Times.
The public sector would provide the land while private companies deliver the facilities and services on contracts of between 25 and 30 years, the documents noted.
One private provider would be expected to deliver “several batched lots”, while health clinic services would be overseen by a single public sector organisation.
Neighbourhood health centres are a key part of the government’s 10-year health plans.
Karin Smyth, the health minister, said the goal was “bringing care closer to home and making sure the NHS is organised around patients’ needs, not the other way round”.
Labour points out that infrastructure budgets in the NHS are almost £40 billion below comparable health systems and say private money is needed to help close the gap. The NHS maintenance backlog is estimated at £15.9bn, the highest on record.
“We need to use every measure available to us, which is why we’re leveraging in private investment to construct some of these centres,” Smyth added.
PFI was introduced by the Conservatives under Sir John Major in 1992 and then expanded by Sir Tony Blair’s Labour government after 1997. It was finally scrapped by the Tories in 2018 after the National Audit Office, the public spending watchdog, found the schemes had burdened taxpayers with billions of pounds in extra costs.
Matthew Taylor, chief executive of the NHS Confederation, said the new partnerships would “learns the lessons from PFI’s failures” and urged ministers to allow private investment in a wider range of infrastructure projects, including the delayed new hospitals programme.
Lord John Hutton, who chairs the Association of Infrastructure Investors in Public Private Partnerships, a trade body, said: “We acknowledge that PFI was not perfect, and we have developed recommendations on new models to simplify contractual arrangements, deliver better value for taxpayers and ensure better oversight of contracts.”
Ahead of the Budget, 40 Labour MPs wrote to Reeves and urged the government to abandon potential plans to use private finance to fund NHS infrastructure.
Several healthcare trusts are still struggling under the weight of their PFI debts, while many of the 25- to 30-year contracts under the PFI scheme are coming to an end in bitter legal disputes over the state of the assets.