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

Scores of hospitals in England are so old and decrepit that some are falling down. The Conservative government recognised 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 due to be tight for the next few years, where would a new government find the money to enable these other projects to go ahead? NHS Providers, which represents trusts, has put forward a new wave of NHS/private-sector partnerships as a potential answer.

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

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

But are 40 new hospitals not due to be built by 2030?

Boris Johnson promised in 2019 to do just that, but the new hospitals programme has been beset by cost overruns, confusion over when promised new facilities would finally arrive and a growing number of trusts saying their schemes would not be ready until after 2030.

Plus, while 100 health trusts applied to join, 88 were refused entry, even though parts of some of them – such as Stepping Hill hospital in Stockport – are literally falling down.

So what is NHS Providers proposing?

That the Treasury overhauls the Department of Health and Social Care’s capital departmental expenditure limit (CDEL) rules, which restrict how much money the NHS can spend on building projects, even if some of that money comes from external sources.

Julian Hartley, the 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 collaborating with property developers, private healthcare companies, pension funds, drug companies, universities and local councils.

Critics claim this would just be a rerun of PFI. What is the concern?

The private finance initiative was used to build an array of new hospitals in the 1990s and 2000s. It was a way of keeping finance used to fund public infrastructure such as schools and hospitals off the Treasury’s balance sheet for reporting public debt.

But under it, developers made profits which, in some cases, were considered obscene. In 2019, the IPPR thinktank calculated that the NHS would end up paying £80bn for £13bn worth of new hospital buildings, so extortionate were the terms their private partners obtained. Trusts spend more than £2bn a year on PFI repayments.

The Commons public accounts committee found in a 2018 report that the “ongoing costs to the institutions at the frontline have been high and the contracts inflexible”. The committee concluded that the “deal is not working for the taxpayer”.

Keep Our NHS Public fears that new joint NHS/private arrangements would again lead to a “need to siphon off taxpayer money to private companies and their shareholders”.

Could Labour act on Hartley’s suggestion?

Wes Streeting, the shadow health secretary, has made clear that he expects the NHS to use the private sector to clear as much of the care backlog as possible. It is unclear, though, if he would see NHS/private sector collaborations as a viable way for health trusts to unlock much-needed funding to enable them to press ahead with building much-needed new facilities.

On Monday, the Health Service Journal asked him if he would relax the Treasury’s CDEL rules, so that trusts could more easily partner with property developers and pension funds on construction projects. He acknowledged trusts faced obstacles accessing capital spending which caused “immense frustration”, and that the shadow chancellor, Rachel Reeves, understood “the scale of the capital challenge in the NHS”.

But, he added, “Treasury rules exist for a reason” and there are “lots of competing demands” for capital, which Labour would have to consider.

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