Private finance initiatives during NHS austerity.

417 ANALYSIS The NHS is facing serious revenue pressures if it is to meet the target of £15bn-20bn efficiency savings by 2013-4. 1 One important pressure for trust budgets in England is the annual private finance initiative (PFI) charge, which is ring fenced and indexed to inflation. Since 1991, all NHS trusts have had to pay a charge on NHS buildings and equipment to the Treasury, which averages around 6% of income. However, NHS hospital trusts with PFI contracts may spend up to 18.6% of their annual income servicing the cost of privately financed investment; this money goes to the private sector. 2 PFI contractors are insulated from efficiency targets. This, coupled with serious deficiencies in contract monitoring, compliance, and contract enforcement at departmental level, means that there are real concerns over the value for money of the policy. Lack of control over PFI costs has serious implications for quality and levels of NHS care. Rise of PFI Since 1992, most large scale public capital investment in the UK uses the PFI procurement route under which a consortium of investment banks, builders, and service contractors raises the finance and designs, builds, and operates the facilities for the public authority through a project company. 3 4 Soft facilities management services such as laundry , maintenance services, catering, and cleaning are also often contracted out to project companies. By December 2009, 159 PFI hospital contracts with a capital value of £13.16bn (€16bn; $22bn) had been signed in the UK, with NHS England being the biggest procurer in terms of numbers (72%) and capital value of the assets (86%). 5 Of the 135 new NHS hospitals constructed between 1997 and 2009 or currently under construction in England, 101 were financed through PFI, accounting for about 90% of the £12.2bn committed to building programmes. 6 Trusts make an annual payment, called the unitary charge, which comprises an availability fee (covering the capital and lifecycle costs) and a facilities management fee (covering the costs of services such as cleaning). The aggregate of all PFI repayments in 2009-10 is £42.79bn. In 2010-11, NHS trusts paid the private sector a total of £0.87bn in availability fees. However, the annual aggregate payments are set to increase, and at a time of real term reductions in public expenditure (fig 1). Relative cost of finance The high cost of private finance is acknowledged and documented. 8 Cuthbert and Cuthbert looked …