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Private Finance Initiative

A short film introduction to PFI

Thanks to Stella Feehily & Out of Joint Theatre Co, Steve Carne and Donna Coombe.

The Private Finance Initiative (PFI) was created by Lord Lamont in 1992 as a way of getting the private sector to build and run public projects which would then be rented back to the state over several decades.

Labour's 1997 Manifesto promised to 'overcome the problems that have plagued the PFI at a national level', and in May 1997 it gave the go-ahead to 73 hospital building schemes by creating an Act that removed the legal issues surrounding the NHS doing deals with private companies.

Between 1997 and 2009, 101 of the 135 new NHS hospitals built were paid for under PFI - using 90 per cent of the £12.2 billion committed under successive building programmes. Current estimates are that £11.9 billion of NHS infrastructure has been built which will cost nearly £80 billion to repay.

Through the Private Finance Initiative scheme private companies have built NHS hospitals and leased them back to the NHS. They also run support services as part of these contracts. This has been highly profitable for the companies involved, but years down he line earlier concerns that PFI offers very poor value are being borne out.

A number of NHS hospitals are struggling to cope with cost of meeting their PFI debts. Hospitals are put into administration - run by the very companies which negotiated the deals in the first place.

In 1990, hospitals paid no charge on their land, buildings and assets; today many PFI hospitals are paying more than 15% of their income - income that should pay for patient care. The figure is rising fast.

  • No more PFI deals should be signed. The policy should be ended now.
  • There is no legitimate reason why future infrastructure costs should not come from Government borrowing. The repayments come ultimately from the public purse and public borrowing is always less costly than private finance.
  • Urgent intervention is needed to prevent service cuts in NHS Trusts that have been financially undermined by the inflated costs of the Private Finance initiative, or in neighbouring Trusts.
  • The Treasury must force a full investigation of mis-sold PFI contracts, penalise those responsible and renegotiate onerous contracts on the basis of fair value, with the refund of excessive payments.