The UK government has awarded £6 million in contracts to consultancy and legal firms to explore whether private finance should be used to fund dozens of new NHS neighbourhood health centres, sparking warnings of a potential repeat of the costly private finance initiative (PFI) model.
The Department of Health and Social Care (DHSC) confirmed that Deloitte and law firm Addleshaw Goddard will each receive £3m to advise on public-private partnerships (PPPs). Their role includes designing possible models, financial planning, and building the business case for using private capital. The remit also suggests they may support the department through procurement if the government pushes ahead.
The first 43 neighbourhood health centres, announced earlier this month by Health Secretary Wes Streeting, will be built in some of England’s most deprived communities. They are designed to bring doctors, nurses, pharmacists, social care workers, and voluntary groups together under one roof to ease pressure on hospitals.
Fears of a Return to Costly PFI Model
Critics argue that involving the private sector could repeat past mistakes. A 2018 report by the National Audit Office revealed that PFI schemes for hospitals and schools in the 1990s and 2000s locked the NHS into decades of costly repayments. The health service is still expected to pay over £40 billion to private firms until the 2040s.
Campaigners, including Johnbosco Nwogbo of We Own It, warned: “Private finance has been a disaster for our public services. Some NHS hospitals are spending more on PFI repayments than on medicines. Profit continues to be taken out by investors, which could instead be used to treat patients.”
He also accused Labour of risking its manifesto promise that the NHS would “always be publicly owned and publicly funded” if it embraces private finance.
Supporters Say Private Investment May Be Necessary
Health leaders argue that private finance might be unavoidable due to the lack of capital funding in the NHS. Matthew Taylor, chief executive of the NHS Confederation, said: “Given the strain on public finances, private investment is one of the only ways to inject vital capital funding into the NHS so it can build modern healthcare facilities fit for the 21st century.”
He stressed that any PPPs should avoid the pitfalls of the old PFI model and instead learn from how other countries have used private funding in healthcare infrastructure.
DHSC and Treasury Response
A DHSC spokesperson said it was right to examine “a range of options” for improving health infrastructure and promised all proposals would be tested against “robust value for money assessments.”
The final decision could come in the budget on 26 November, when Chancellor Rachel Reeves is expected to announce whether private money will help finance the project.
PFI’s Controversial Legacy
The Private Finance Initiative (PFI), launched in the early 1990s, allowed private companies to build public infrastructure such as hospitals, schools, and prisons, with the state repaying the costs over decades. While it provided new facilities upfront, the long-term contracts saddled taxpayers with far higher costs.
In healthcare, PFI repayments have been a heavy burden. For example, some NHS trusts spend more on servicing PFI debt than on essential medical supplies. By 2018, the government effectively banned new PFI deals after widespread criticism from auditors, unions, and patient groups.
Today’s debate over PPPs revives concerns that the government is considering a rebranded form of PFI at a time when the NHS faces record backlogs, underfunded infrastructure, and increasing pressure to modernise facilities.
