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Private Finance Initiative

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Before the idea of ( Private Finance Initiative ) PFI came to prominence, all new hospital building was by convention funded from the Treasury, as it was believed it was best able to raise money and able to control public sector expenditure. In June 1994, the Capital Investment Manual (CIM) was published, setting out the terms of PFI contracts. The CIM made it clear that future capital projects (building of new facilities) had to look at whether PFI was preferable to using public sector funding. By the end of 1995, 60 relatively small projects had been planned for, at a total cost of around £2 billion. Under PFI, buildings were built and serviced by the private sector, and then leased back to the NHS. The Labour government elected under Tony Blair in 1997 embraced PFI projects, recognising that public spending needed to be curtailed.

Under the Private Finance Initiative, an increasing number of hospitals have been built (or rebuilt) by private sector consortia, although the government also encouraged private sector treatment centres, so called "surgicentres". There has been significant criticism of this, with a study by a consultancy company which works for the Department of Health showing that for every £200 million spent on privately financed hospitals the NHS loses 1000 doctors and nurses. The first PFI hospitals contain some 28% fewer beds than the ones they replaced. As well as this, it has been noted that the return for construction companies on PFI contracts could be as high as 58%, and that in funding hospitals from the private rather than public sector cost the NHS almost half a billion pounds more every year.


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