Photograph: Peter Byrne/PA
Last year, NHS trusts spent almost half a billion pounds on private company interest charges for Private Finance Initiative (PFI) contracts, equivalent to the salaries of 15,000 newly qualified nurses.
Hospital groups spent £2.3billion on legacy PFI projects in 2020-21, including just under £1billion on essential service costs such as cleaning and maintenance. A third of the remaining PFI spending – £457m – was spent solely on reimbursing interest charges.
PFI is a method of financing infrastructure projects such as NHS hospitals, which uses private funds to pay for initial costs such as design, construction and maintenance. These costs are repaid over many years to the companies that financed the project – often banks and construction companies. Hospital trusts pay companies annually in a unit payment, which is written into the contract.
The government decided to halt all future PFI deals in 2018, after the collapse of Carillion, which was the main supplier of two large hospital PFI contracts. Then-Chancellor Philip Hammond said: “I have never signed a PFI contract as Chancellor, and I can confirm today that I never will.”
A total of 101 NHS trusts are still burdened with just under £50billion in future unit payments, despite severe budget challenges ahead, according to a Guardian analysis of hospital trust accounts.
The figures reveal that four trusts saw more than half of their total PFI unit payment go solely on interest to private corporations. Around 58.3% of all the money Mersey Care spent on the PFI was interest in 2020-21. This is followed by Northumbria Healthcare (53.4%), Alder Hey Children’s Trust (52.9%) and Sussex Partnership (51%).
David Rowland, director of the Center for Health and the Public Interest, said: “For trusts with a PFI hospital, the high costs of these programs will continue to weigh heavily on their budgets. This is at a time when they are making planned cuts of £12billion a year and expect to face a further £6billion in costs next year due to inflation.
“Despite pressure on NHS trusts to make cuts, under the 25-year contract, PFI companies and their shareholders have been given an infallible guarantee that they will receive payments and a return on their investment. In short, expenditures on personnel, equipment, and other capital projects can be reduced by a trust, but not their PFI payments.
“Furthermore, under PFI contracts, NHS trusts, not private companies, bear the risk of high inflation – meaning payments to PFI companies can rise significantly as the index of retail price increases. Rising inflation will therefore not substantially, if at all, affect the earnings of PFI companies.
Dr John Lister, a health policy scholar and member of Keep Our NHS Public, also warned of the consequences of inflation on PFI payments. He said: ‘The NHS is at the top of payments for PFI hospitals over the next two years, with some contracts running until 2048. But the problem this year and next is that rapidly rising inflation will further increase the cost of unit royalty payments that are linked to the RPI.
“Some trusts are already looking at increases of millions to their annual payments, which will continue until the end of the contract, in addition to soaring energy prices, drug costs and other non-pay items.”