Can Labour use public-private projects to fix England’s hospitals?

Dozens of hospitals in England are so old and dilapidated that some are collapsing. The Conservative government acknowledged that the NHS needed a massive modernisation of its estate in 2019 when Boris Johnson promised 40 new hospitals by 2030.

But with public spending set to be tight in the coming years, where would a new government find the money to keep these other projects going? NHS Providers, which represents trusts, has put forward a new wave of NHS/private sector partnerships as one possible answer.

Why are so many hospitals in England in such a poor state?

That’s partly because so many NHS buildings are old, and also because the NHS’s capital budget – which is used to pay for repairs, build new facilities and buy new equipment such as scanners – has been low for years. The cost of all necessary maintenance repairs across the NHS has risen from £4.7bn in 2011-12 to £11.6bn in 2022-23.

But won’t 40 new hospitals be built by 2030?

Boris Johnson pledged to do so in 2019, but the new hospital programme has been plagued by cost overruns, uncertainty over when the promised new facilities would finally arrive and a growing number of trusts saying their plans will not be ready until after 2030.

Moreover, while 100 health funds applied 88 were refused entry to join, even though parts of some of them – such as Stepping Hill Hospital in Stockport – literally collapsed.

What does NHS Providers propose?

That the Treasury review the Department of Health and Social Care’s Capital Expenditure Limit (CDEL) rules. These rules limit how much money the NHS can spend on construction projects, even if some of that money comes from external sources.

Julian Hartley, head of NHS Providers, wants the new government to apply “fresh thinking” and “imagination” to how the health service can access potentially billions of pounds to build new facilities – by working with property developers, private healthcare companies, pension funds, pharmaceutical companies, universities and local authorities.

Critics claim this would simply be a repeat of PFI. What is the concern?

The private finance initiative was used to build a series of new hospitals in the 1990s and 2000s. It was a way to keep funding used to finance public infrastructure such as schools and hospitals off the Treasury Department’s balance sheet for reporting government debt.

But underneath, developers were making profits that were in some cases considered obscene. In 2019, the think tank IPPR calculated that the NHS would ultimately pay £80 billion for £13 billion of new hospital buildings, so exorbitant were the terms their private partners were offered. Trusts spend more than £2 billion a year on PFI repayments.

The House of Commons Public Accounts Committee concluded in a 2018 report report that the “ongoing costs to frontline institutions have been high and contracts inflexible”. The commission concluded that the “deal does not work for taxpayers”.

Keep our NHS alive. Public fear is that new joint NHS/private arrangements will once again lead to a “need to skim taxpayers’ money off to private companies and their shareholders”.

Can Labour take action on Hartley’s suggestion?

Wes Streeting, the shadow health secretary, has made it clear that he expects the NHS to use the private sector to help close as much of the backlog as possible. However, it is unclear whether he sees NHS-private sector partnerships as a viable way for healthcare organisations to unlock much-needed funding so they can continue to build much-needed new facilities.

Monday is the Health Service Journal asked him whether he would relax the Treasury’s CDEL rules to make it easier for trusts to work with property developers and pension funds on construction projects. He acknowledged that trusts faced obstacles in obtaining capital expenditure, leading to “huge frustration”, and that the shadow chancellor, Rachel Reeves, understood “the scale of the capital challenge in the NHS”.

But, he added, “the Treasury rules exist for a reason” and there are “many competing demands” on capital that Labor should take into account.

However, it is not inconceivable that Labour, which used the term “partnership” with business 18 times in its manifesto, could be persuaded to explore Hartley’s idea as a way of using private money to rebuild the NHS’s ageing, crumbling infrastructure, given the financial position it will inherit.