PFI hospitals are not value for money

May 16, 2002

The government claims that using the private finance initiative (PFI) to build NHS hospitals offers value for money. Yet researchers in this week's BMJ show that the costs of private finance are higher and that NHS trusts pay much more than they would if the new buildings had been publicly funded.

Allyson Pollock and colleagues examined the structure of costs for three PFI schemes: North Durham, Carlisle, and Worcester. They estimated what the cost of the new investment would have been if the scheme had been publicly funded, and they examined the government's value for money case.

They found that the PFI costs were almost double the estimated costs of a similar scheme funded by public finance. These higher costs are due in part to financing costs that a public sector alternative would not incur, say the authors.

Furthermore, the value for money assessment seems to be no more than a mechanism that has been created to make the case for using private finance, say the authors. Many hospital PFI schemes show value for money only after risk transfer. However, as other failed private finance schemes such as the Benefits Agency and Passport Office show, ultimately the risk is not transferred and the taxpayer ends up paying for private sector risk.

The government's case for using PFI rests on a value for money assessment skewed in favour of private finance, say the authors. The private finance initiative brings no new capital investment into public services and is a debt which has to be serviced by future generations, they conclude.
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BMJ

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