Private Finance Initiative (PFI)

Over the past 10 years the CHPI has worked with specialists in Finance and Accountancy to understand how the Private Finance Initiative (PFI) has impacted the NHS.

PFI was introduced in the early 2000s as a way of paying for the building, maintenance and operation of new NHS hospitals.  Under PFI a consortium of companies takes out a series of loans to build the hospital and each year the NHS Trust, pays an amount to the company so that it can pay back its loans, as well as to cover the cost of running and maintaining the building.  PFI companies make large profits out of these schemes and pay high dividends to their shareholders.

Often the companies which form part of the consortium lend money to the PFI projects at rates of interest which are much higher than the cost of government borrowing. The money which leaks out of these PFI contracts in the form of profits dividends and interest payments could go towards paying for more doctors and nurses.

PFI contracts are problematic for NHS Trusts because they must pay the PFI company irrespective of their financial position and before all other items of expenditure. In some cases, NHS Trusts spend more on their PFI schemes than on drugs for patients.

Solutions

Policy options include:

  • centralising the PFI debt so that the burden does not fall on individual trusts

  • taxing the profits of PFI companies

  • enforcing PFI contracts more rigorously

  • buying out PFI schemes

Key Facts

  • £28.4 billion - the turnover of 99 NHS PFI companies between 2004 and 2021.

  • £1.9 billion - the pre-tax profits made by 99 NHS PFI companies from NHS Trusts between 2004 and 2021.

  • £1.07 billion - the dividends paid out to 99 NHS PFI companies between 2004 and 2021.

  • £47.6 million - the total amount paid out in Directors fees by 99 PFI companies between 2004 and 2021.

  • £131 million - the total amount generated by PFI companies in interest payments in 7 NHS PFI contracts between 2004 and 2022 in return for issuing high cost loans.

Reports on PFI

Reports
P.F.I. Profiting from Inflation?
P.F.I. Profiting from Inflation?

New report shows the significant impact of inflation on NHS Trusts with PFI schemes, with large profits and dividend payments continuing to be made by PFI companies.

Dealing with the legacy of PFI – options for policymakers
Dealing with the legacy of PFI – options for policymakers

This report analyses five options available to policy makers to address the problems caused by existing PFI schemes. For each option, it quantifies its impact and assesses its advantages, disadvantages, and feasibility.

Counting the cost of school PFI schemes
Counting the cost of school PFI schemes

This report extends CHPI’s existing analysis on PFI in the NHS to look at the education sector in England, and potential avenues for saving taxpayers' money.

P.F.I. - Profiting From Infirmaries
P.F.I. - Profiting From Infirmaries

This report looks at the significant profits made by PFI companies from NHS contracts over the last 6 years.

The return of PFI – will the NHS pay a higher price for new hospitals?
The return of PFI – will the NHS pay a higher price for new hospitals?

This report analyses the financing structure of the new Private Finance 2 scheme and finds that it is likely to increase costs to the NHS. Restructuring the balance of debt and risk capital would increase the rate of return to private investors by 15% compared to the original Private Finance Initiative.

Blogs on PFI

Our impact in the media on PFI

A 3-minute summary of how PFI affects the NHS, based on the findings of our 2017 report "P.F.I. – Profiting From Infirmaries".

BBC Newsnight coverage of CHPI study into the Private Finance Initiative.