Former Labour health minister warns PFI feuds threaten to disrupt hospitals
The looming expiration of more than 100 legacy PFI contracts could cause significant disruption to patients in UK hospitals without urgent preparation, a former Labour health minister has warned.
Public Finance Initiatives (PFIs) were first formulated in the 1990s and heavily relied on in the Blair era to keep the cost of major infrastructure projects, such as schools, hospitals and prisons, off government books. However, they were eventually ditched in 2018 amid controversy over their value for money.
Some 150 PFIs contracts with a capital value of £6bn are set to expire this parliament and will be transferred back into public ownership. However, the arduous process risks being disrupted by growing tensions between the public and private sector bodies involved.
A report from the Association of Infrastructure Investors in Public Private Partnerships (AIIP), chaired by ex-health minister Lord John Hutton, warned of an “increasing number of expensive disputes” in recent years, which have emerged alongside growing pressure on public sector finances.
Such disputes suck value from the assets and services delivered by the PFIs, due to legal fees and other related costs, as well as erode the “fundamental” trust between groups necessary to ensure “business-as-usual performance,” the AIIP’s report warned. They also create employee retention issues, with staff complaining of an “increasingly confrontational” workplace environment.
The matter is more pressing given the immediate prospect of such a significant number of contracts expiring, a process which will require cross-party collaboration to ensure operations at the services involved continue smoothly throughout the transition period.
The AIIP called for urgent action to resolve the issues “precisely because this level of required collaboration is threatened by disputes and poor relationships, which are likely to increase without intervention.”
Should a solution to the near-term handover not be found, Lord Hutton warned of the risk of “service disruption” to hospitals and patients. “It could be about equipment not being available, or fiscal capacity not being available. It could be a variety of things,” he told Morning Wire
Any “misalignment” in the transition to new contractual arrangements would place “service continuity at risk, which can be critical in the case of 24/7 environments such as hospitals,” the AIIP said.
PFIs have been used to deliver a huge number of major infrastructure projects in sectors stretching from education to defence. More than 600 are currently in operation, all of which will need a resolution framework at some point in the future.
But Hutton warned recent disputes had been most predominant in the health sector, driven by a “deadly cocktail” of financial pressure on the NHS and “lack of adequate contract management resources.”
He was keen to stress his support of the PFI model in general, although he warned disruption in the hand-back process could also undermine confidence from private investors in the UK.
“I think that’s the major, macro risk, if you like. But I think underneath that, there are some very significant risks for pupils and patients if we don’t get this right,” he said.
A government spokesperson said: “We note the report and will review its findings. The Infrastructure Projects Authority is committed to supporting the public sector to ensure Private Finance Initiatives deliver vital public services and provide value for money.
“We will continue to help these organisations manage the end of these contracts and transitions between service providers, such as by providing expert advice and training through the PFI Centre of Excellence, to protect taxpayers’ money.”