15 December 2025
The new Royal Liverpool University Hospital under construction in 2014. It fully opened finally in 2022 after the PFI contractor went bust. Photo Rept0n1x via Flickr (CC BY-SA 2.0).
The government is grappling with how to revive Britain’s infrastructure. It seeks private investment funding to do so, seemingly oblivious to the damaging legacy of the Private Finance Initiative (PFI).
The Chancellor, Rachel Reeves, is looking back to the ideas of the Blair/Brown Labour administration. They took a Conservative policy, that private companies could be contracted to build and run public service projects, and massively expanded its use.
Controversial
PFI was controversial from the start. But it became the only game in town to fund public buildings. Its damaging financial legacy lives on with public money still pouring out. And many of the long-term contracts coming to an end are mired in expensive litigation.
As long ago as 2017, the National Audit Office found, to no one’s surprise, that there was no evidence of operational efficiency. It said that overall cash spending on PFI projects was higher than publicly financed alternatives, citing examples such as 40 per cent more for a group of schools and 70 per cent more for a hospital.
The NAO report also cited a Treasury Select Committee report from 2011 which said that “a 70 per cent increase in investment could be achieved for the same long term cost if government funding were used instead of private finance.”
These should have been the end of PFI, but existing schemes carried on with no call by politicians to stop them.
Timid
Now 40 Labour MPs have written to Reeves to ask that no new PFI schemes be introduced. A timid step, given the wealth of evidence justifying the opposition of unions in the NHS and elsewhere from the outset.
The TUC and trade unions voiced their opposition in response to the Budget, but have otherwise said little. The Confederation of British Industry is in favour of PFI-style deals, naturally.
The Royal Liverpool University Hospital PFI fiasco may have been the most prominent example of PFI failure, but it was typical rather than exceptional. For example, some hospitals pay more in PFI interest payments than in buying medicines.
• This article was revised after publication to clarify the findings of the NAO and Treasury Select Committee reports.