The Government’s Private Finance 2 initiative is likely to divert more resources away from the NHS in England than the original Private Finance Initiative, according to a new report from the Centre for Health and the Public Interest.
The report, authored by Dr Mark Hellowell, warns that Private Finance 2 deals are likely to be more expensive than existing PFI deals. Analysis of the financing model for the new scheme finds that restructuring the balance of debt and risk capital would increase the rate of return to private investors by 15%, under current market conditions.
The report also found that:
- NHS decision-makers are often left with no option but to enter into private finance deals as the government has reduced capital budgets by an unprecedented amount in the past five years.
- The annual return on investment for companies entering Private Finance Initiative deals has been as high as 70% .
- A marketised healthcare system introduces perverse incentives for providers who may pursue large-scale capital investments as a means of increasing their scale or claim over the resources in the local health economy.
Dr Mark Hellowell said:
“Private finance remains the only game in town for hospital building projects. This analysis shows that rather than fixing the problems with the previous PFI model, the Government’s reforms are likely to leave taxpayers with an even higher bill. Private Finance 2 will deliver high returns to private investors at the potential risk of both the financial health of the NHS, and the health of the population it serves.”