As ministers weigh up the options for using private capital to build some of the new “neighbourhood health centres” and to finance the delayed “new hospitals programme,” recent revelations about three older PFI schemes remind us of the long-term costs.
1. England’s first PFI hospital ends contract early
Carlisle’s Cumberland Infirmary, the first hospital completed under New Labour’s controversial Private Finance Initiative, is to end its PFI contract four years ahead of a 30-year break clause (in an original 45-year deal).
North Cumbria Integrated Care (NCIC), which runs the hospital, announced at the end of January that on December 31 it had given notice of a “no-fault voluntary termination” of the PFI contract as of March 31.
The £67m hospital opened in 2000 amid a whole series of disastrous “teething problems” including plumbing faults that led to water, and even sewage leaking into clinical areas, faulty windows, leaks in the roof, and much more, with some issues unresolved two years later. Many of the same design faults that were discovered in Carlisle also cropped up in subsequent first wave PFI hospitals.
Even the pro-PFI journal InfraPPPworld now admits that:
“The project was groundbreaking as the first PFI hospital to be bond-financed, but it faced early criticisms for design flaws (such as cramped layouts, overheating atriums, and later fire safety concerns over materials), financial pressures from high ongoing PFI payments highlighted by the 2011 coalition government, and operational challenges.”
The issue of inadequate fire safety only emerged as an issue in 2015, when the Trust commissioned an independent report, which led to demands that the PFI “partners” take immediate remedial action, and an angry statement from the Chief Operating Officer, Helen Ray, who said:
“Whilst all appropriate measures are now in place to safeguard staff, patients and visitors against the possibility of fire whilst this work takes place, the risks identified through our own independent report were wholly unacceptable and were raised immediately with our PFI partner, who are responsible for the Cumberland Infirmary building.
“This is not the first time we have uncovered such major flaws in the service provided to us through our PFI partner and the Trust Board remains very deeply concerned that the current arrangements are not providing the high standards of service we require for our patients in North Cumbria on a consistent basis.”
The following year, there was another fire safety scare at the £380m University Hospital Coventry and Warwickshire. There have also been similar concerns in other PFI hospitals, large and small, in Bodmin (Cornwall), Peterborough and in Islington’s Whittington Hospital, where a fire broke out in 2018.
But PFI doesn’t come cheap. Unitary charge payments for the Cumberland Infirmary add up to a staggering £547m by March this year, eight times the initial cost of the hospital. This includes privatised cleaning, catering, and other non-clinical services, which in most PFIs are around a third of the total charge. Even then, the building’s cost under a PFI is more than five times the initial cost.
The four remaining unitary charge payments, which would have fallen due before the break clause, would have added another £150m to the bill, bringing the total outlay to 10 times the building’s initial cost.
It’s not clear how much of this the Trust will now need to spend on maintenance and remedial work for the building, which has proven to be more of a liability than an asset.
2. Totting up the PFI payments
The Mid Yorkshire Hospitals UNISON Branch has been keeping score of the Trust’s ‘unitary charge’ payments for the use of the PFI-funded Pinderfields and Pontefract hospitals up to last October.
The tally reveals that payments for the last full financial year (2024/5) added up to £67,237,955 – over 40% more than the first full year (2011/12) cost of £47,795,060.
This payment brings the total forked out so far for the two hospitals to £675 million, £20m more than the expected cost when the contract was approved by the Treasury, and more than double the initial £331m cost of the hospitals.
These payments cover only the first 14 years of the contract. The Treasury spreadsheet shows that there are another 17 years of payments – totalling more than £1 billion – still to come until the final payment in 2042/3.
That means the total cost will be at least £1.73billion – and much more if inflation forces unitary charge payments up – not far short of six times the £311m cost of the two hospitals.
However, the Trust has been instructed by the Health Minister, Wes Streeting, and NHS England to make savings of approximately £18 million this financial year.
UNISON has therefore requested that the Trust ask Consort Healthcare, the Trust’s so-called “PFI partners,” to make a contribution towards this. Their monthly income and profits from renting Pinderfields and Pontefract Hospitals back to the Trust are on the rise.
But the Trust has not contacted Consort, even though its annual report states that PFI is a risk-free, inflation-guaranteed rip-off of taxpayers’ money that grows year on year. The latest annual report (published in December 2024) shows that profits increased from £7.8 million in 2023 to £11 million in 2024.
Because NHS managers across the country are reluctant to ask questions about PFI, the UNISON Branch will write to Consort and HICL Infrastructure (which owns 100% of the Mid Yorkshire PFI) to request a contribution. UNISON will also be writing to local MPs, urging them to act to stop this drain on NHS resources once and for all.
3. South Tees Trust blames ‘excess PFI costs’ for deficit
The inflated costs of one of the largest first-wave PFI-funded hospitals, the James Cook University Hospital in Middlesbrough, run by South Tees Hospitals Trust, have been a major factor in destabilising the Trust’s finances.
South Tees now faces a massive £100m target for ‘efficiency savings’ in the next financial year, representing 10 per cent of the Trust’s turnover. Its Chief Executive has publicly admitted that such hefty savings are not possible in one go. Trust bosses have asked to make the savings over three years instead.
According to the Trust’s latest (2024-25) annual report, additional ‘life-cycle’ costs (“mandatory annual maintenance charges built into the PFI scheme”) are required to be paid each year from the Trust’s capital budget, so “the total annual payments (revenue and capital) by the Trust for the James Cook PFI scheme are now £74 million per year.”
As a result, the Annual Report declares:
“The PFI scheme is now adding approximately £25million each year to the Trust’s expenditure compared to a hospital provided through public capital / borrowing. This additional cost is the largest single contributor to the Trust’s structural deficit.”
According to the original Treasury projection, the Trust was expected to have paid a monstrous £1.1 billion in unitary charges by the end of March – almost seven times the initial £151m cost of the hospital.
Moreover, the contract has another eight years to run, with another £668m to pay, bringing the total cost to almost £1.8 billion (around TWELVE times the initial cost).
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